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DEBT
 6 Months Ended
Jun. 30, 2025
DEBT  
DEBT

NOTE 6: -   DEBT

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Loan Facility

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On May 1, 2023, the Company refinanced its former $25,000 credit facility with a new $30,000 credit facility in the Loan and Security Agreement, and Supplement thereto (the “LSA” or the “Avenue Loan Facility”) by and between the Company and its subsidiary PsyInnovations Inc., collectively as the borrowers (the “Borrowers”) and Avenue Venture Opportunities Fund II, L.P. and Avenue Venture Opportunities Fund, L.P., collectively as the lenders (the “Avenue Lenders”). The LSA provides for a four-year secured credit facility in an aggregate principal amount of up to $40,000, of which $30,000 was made available on the closing date (the “Initial Tranche”) and up to $10,000 (the “Discretionary Tranche”) may be made available on the later of July 1, 2023, or the date the Avenue Lenders approve the issuance of the Discretionary Tranche. On May 1, 2023, the Borrowers closed on the Initial Tranche, less certain fees and expenses payable to or on behalf of the Avenue Lenders.

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During the term of the Avenue Loan Facility, interest payable in cash by the Borrowers shall accrue on any outstanding balance due under the Avenue Loan Facility at a rate per annum equal to the higher of (x) the sum of four one-half percent (4.50%) plus the prime rate as published in the Wall Street Journal and (y) twelve and one-half percent (12.50%). During an event of default, any outstanding amount under the Avenue Loan Facility will bear interest at a rate of 5.00% in excess of the otherwise applicable rate of interest and the outstanding balance shall be due and payable. As part of the LSA, the Company issued a warrant (the “Warrant”) to purchase up to 584,882 shares of the Company’s Common Stock, at an exercise price of $3.334 per share, which has a term of five years from the issuance date.

On February 15, 2024, the Company and the Borrowers entered into the First Amendment to Loan and Security Agreement and Supplement (the “Avenue Amendment”) with the Avenue Lenders. Pursuant to the Avenue Amendment, the parties agreed to include the Merger Sub and Twill as parties to the Company’s existing loan facility with the lenders. In addition, the Avenue Amendment permits the lenders, subject to Nasdaq rules, to convert up to $2,000 of the principal amount of its loan to the Company at a fixed conversion price of $4.001 per share.

On June 25, 2024, the Company stockholders approved the Avenue Amendment and repriced the Warrant to purchase up to 584,882 shares of Common Stock issued to the lenders on May 1, 2023 at an exercise price $3.334 per share, to permit an amendment to the exercise price of such Warrants to $2.02 which is the “minimum price” as defined by Nasdaq rules as of the closing of the Twill Agreement and (ii) permit the lenders, subject to Nasdaq rules, to convert up to $2,000 of the principal amount of the outstanding Avenue Loan Facility into Borrower’s unrestricted shares of the Company’s Common Stock at a conversion price of $4.001.

Pursuant to the LSA and the Avenue Amendment, the Company was obligated to maintain at least $5,000 of unrestricted cash in deposit accounts located in the United States. This amount is classified within cash and cash equivalents.

The Company concluded that Avenue Loan Facility and the Warrant are freestanding financial instruments since these instruments are legally detachable and separately exercisable. The Company has concluded that the Warrant meets all the conditions to be classified as equity pursuant to ASC 480 and ASC 815-40. In addition, the Company elected to account for the Avenue Loan Facility under the fair value option in accordance with ASC 825, “Financial Instruments.” Under the fair value option, changes in fair value are recorded in earnings except for fair value adjustments related to instrument specific credit risk, which are recorded as other comprehensive income or loss. As such, the proceeds were first allocated to the Avenue Loan Facility at fair value in the amount of $28,215 and the remaining amount of $1,389 was allocated to the Warrant.

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NOTE 6: -   DEBT (Cont.)

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The Company remeasurement expenses related to the Avenue Loan for the three and six months ended June 30, 2025, were $807 and $1,077, compared to $169 and $86 of remeasurement income for the three and six months ended June 30, 2024, which were included as part of the financial (income) expenses in the statement of comprehensive loss. During the six month periods ended June 30, 2025 and, 2024, the Company did not recognize any instrument specific credit risk fair value adjustment.

In connection with the debt modification, the Company also modified the Warrant by reducing the exercise price of the Warrant from $3.334 to $2.02. During the six months ended June 30, 2024, the Company recognized the incremental fair value resulting from the modification in the amount of $70.

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On December 16, 2024, the Company, entered into the Third Amendment to Loan and Security Agreement and Supplement (the “Third Avenue Amendment”) with the Avenue Lenders. Pursuant to the Third Avenue Amendment, the parties agreed to (i) amend the potential interest only period under the loan facility such that the existing interest only period ending on May 30, 2025 was extended by a period of six months provided the Company achieving certain net proceeds from an equity financing on or before March 31, 2025 in the aggregate; (ii) an additional sixth month interest only extension period was added, which is conditioned on the Company achieving a certain net revenue milestone, with cash burn not to exceed a certain level, for the trailing six month period ending September 30, 2025; (iii) the interest only period may not exceed a total of 36 months from the closing of the loan as of May 1, 2023; and (iv) the maturity date of the loan will be extended from May 1, 2027 to November 1, 2027, provided that the Company meets the foregoing amended milestones. In January 2025, the Company met the equity financing milestone.

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In addition, the Avenue Amendment provides (i) that the Company will seek stockholder approval to reprice the Warrant issued to the Avenue Lenders on May 1, 2023 to permit an amendment to the exercise price of such Warrant to the “minimum price” as defined by Nasdaq rules as of the closing of the Avenue Amendment (or $0.7208 per share) and (ii) permit the Avenue Lenders, subject to Nasdaq rules, to convert up to $2,000 of the principal amount of its loan to the Company’s common stock at a conversion price of $0.8650 per share.

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On April 28, 2025, the Company held a special meeting of stockholders in which the stockholders approved a reduction to the exercise price of certain warrants to purchase 584,882 shares of Common Stock issued to the Avenue Lenders to $0.7208 per share. The Company recognized the incremental fair value resulting from the modification in the amount of $102.

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On April 30, 2025, the Company refinanced its existing $30,000 credit facility with a new $32,500 credit  agreement (the “Credit Agreement”), by and among the Company as borrower, the financial institutions party thereto from time to time as lenders, and Callodine Commercial Finance, LLC (in its capacity as agent for all lenders, “Agent”, and collectively with other lenders, “Lenders” and each a “Lender”) (the “Callodine Loan Facility). Under the terms of the Credit Agreement, each Lender agreed to make a multi-draw term loan (each a “Term Loan”) in which the Company borrowed $32,500 at the time of closing on April 30, 2025. In addition, the Company may at its option draw an aggregate of up to an additional $17,500. $2,500 of such additional Term Loan is subject to the achievement of certain revenue and gross margin thresholds. $15,000 of such additional Term Loan is subject to the discretion of the Agent and the Lenders. The Credit Agreement has a five-year term that matures in April 2030.

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The outstanding principal balance under the loan shall bear interest at a per annum rate of interest equal to (i) the Secured Overnight Financing Rate (“SOFR”), (as defined in the Credit Agreement) plus (ii) seven and three-quarters of one percent (7.75%). Upon maturity and/or upon an event of default (or upon any acceleration), interest shall automatically accrue without notice to the Company at a rate per annum equal to the lesser or (i) three percent (3%) over the Contract Rate (as defined in the Credit Agreement), or (ii) the maximum rate of interest permitted to be

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NOTE 6: -   DEBT (Cont.)

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charged by applicable laws or regulations until paid. The Company paid certain fees with respect to the Term Loan, including a closing fee, an exit fee, and an agent fee. Voluntary prepayments of the Term Loan prior to the third anniversary of the closing are also subject to certain pre-payment penalties.

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In connection with the funding of the closing amount, the Company agreed to issue the Lenders a warrant to purchase an aggregate of 2,114,140 shares of our Common Stock, with an exercise price of $0.8278, which shall have a term of seven years from the issuance date. In addition, up to $2,500 of the loaned amount can be converted into shares of our Common Stock at a price of $0.9933 per share

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The Company concluded that Callodine Loan Facility and the Warrant are freestanding financial instruments since these instruments are legally detachable and separately exercisable. The Company has concluded that the Warrant meets all the conditions to be classified as equity pursuant to ASC 480 and ASC 815-40. In addition, the Callodine Loan Facility is measured at amortized cost.

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The fair value of the Callodine Loan Facility is recognized in connection with the Company’s Credit Agreement with respect to the Initial Commitment Amount only. The fair value of the Callodine Loan Facility was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the Callodine Loan Facility, which is reported within non-current liabilities (Maturity Date - April 30, 2030) on the consolidated balance sheets, is estimated by the Company as of April 30, 2025 such that the value of the instruments granted by the Company under the Callodine Loan Facility equals the net principal amount (net of origination fees).

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The Callodine Loan Facility incorporates comparisons to instruments with similar covenants, collateral, and risk profiles and was obtained using a discounted cash flow technique. On the date of Callodine Loan Facility origination, or April 30, 2025, the discount rate was arrived at by calibrating the loan amount of $32,500 with the fair value of the warrants of $1,234 and the loan terms interest rate equal to the greater of (i) The SOFR, and(ii) 4.0% plus a margin of 7.75%. The implied internal rate of return of the loan resulted with B rating US dollar zero coupon discount curve plus a 11.473% credit curve.

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As of June 30, 2025, the Company did not meet one of the financial covenants under the Credit Agreement. Upon an Event of Default (as defined in the Credit Agreement) under the Credit Agreement, interest shall accrue to at a rate per annum equal to the lesser of (i) three percent (3%) over the Contract Rate (as defined in the Credit Agreement), or (ii) the maximum rate of interest permitted to be charged by applicable laws or regulations, until paid. The Company notified Callodine of its intention to utilize an Equity Cure (as defined in the Credit Agreement) to address the event of default. Callodine waived the event of default, subject to the successful implementation of an equity cure no later than November 15, 2025.

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The Company can avoid an event of default in connection with such covenant by executing an equity cure. An equity cure may be effected through the issuance of additional Equity Interests and/or Subordinated Debt (each as defined in the Credit Agreement), on terms and conditions reasonably satisfactory to the Agent, in an aggregate amount equal to or greater than one-hundred and fifty percent (150%) of the breached amount for the first such cure, one-hundred and seventy-five percent (175%) for the second such cure, and two-hundred percent (200%) for the third such cure (each such amount referred to as the "Minimum Cure Amount"). The Company notified Callodine of its intention to utilize an equity cure to address the event of default as defined in the Credit Agreement.

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NOTE 6: -   DEBT (Cont.)

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Orbimed Warrant

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On June 9, 2022 the Company entered into a Credit Agreement, with OrbiMed Royalty and Credit Opportunities III, LP (“Orbimed”), as the lender for a five-year senior secured credit facility in an aggregate principal amount of up to $50 million, of which $25 million was made available on the closing date and up to $25 million was to be made available on or prior to June 30, 2023, subject to certain revenue requirements (the “Orbimed Loan”).

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On June 9, 2022 (the closing date of the Orbimed Loan, which was repaid in May 2023), the Company agreed to issue Orbimed a warrant (the “Orbimed Warrant”) to purchase up to 226,586 shares of the Company’s Common Stock, at an exercise price of $6.62 per share, which shall have a term of 7 years from the issuance date. The Orbimed Warrant contains customary share adjustment provisions, as well as weighted average price protection in certain circumstances but in no event will the exercise price of the Warrant be adjusted to a price less than $4.00 per share. Following the issuance and sale of the Company’s Series C Preferred Stock in February 2024, and as a result of a certain price protection provision in the Orbimed Warrant, the exercise price of the Orbimed Warrant was adjusted to a price per share of $4.00.

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The Company has concluded that the Orbimed Warrant is not indexed to the Company's own stock and should be recorded as a liability measured at fair value with changes in fair value recognized in earnings. The Company remeasurement income related to the Orbimed Warrant for the three and six-months periods ended June 30, 2025 were $0 and $29, respectively. For the three and six-months periods ended June 30, 2024 the Company remeasurement income were $61 and $86, respectively.

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Pre-Funded Warrants

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On February 15, 2024, as part of the acquisition of Twill (See note 1) the Company issued Pre-Funded Warrants to purchase up to 10,000,400 shares of Company Common Stock, issuable in 4 equal tranches, to a trust (the “Trust”) formed for the benefit of certain equity and debt holders of Twill.

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The Company has classified the Pre-Funded Warrants as liability pursuant to ASC 815-40 since the Pre-Funded Warrants do not meet all the equity classification conditions. Accordingly, the Company measured the Pre-Funded

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Warrants at their fair value. The Pre-Funded Warrant liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of comprehensive loss.

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In November 2024, a total of 2,500,100 Pre-Funded Warrants were exercised into 2,499,828 shares of Common Stock.

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In February 2025, a total of 2,500,100 Pre-Funded Warrants were exercised into 2,499,698 shares of Common Stock.

During the three and six-months periods ended June 30, 2025, the Company recognized $289 of remeasurement expenses and $796 of remeasurement income related to the Pre-Funded Warrants respectively. For the three and six-months periods ended June 30, 2024, the Company remeasurement income was $3,401 and $12,557 respectively.