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Notes Payable
 9 Months Ended
Sep. 30, 2025
Notes Payable [Abstract]  
Notes Payable

Note 6 — Notes Payable

 

Veru Notes Payable

 

As December 31, 2024, the Company had two non-interest-bearing notes payable outstanding with principal amounts of $5.0 million and initial maturity dates of April 19, 2024 (“April Veru Note”), and September 30, 2024 (“September Veru Note” and together with the April Veru Note, the “Veru Notes”), respectively. In accordance with the Veru Notes, no principal payments are due until maturity; however, the Company may voluntarily prepay the Veru Notes with no penalty. Additionally, in an Event of Default, as defined in the Veru Notes, the unpaid principal amount of the Veru Notes will accrue interest at a rate of 10.0% per annum.

 

The Company imputed interest on the Veru Notes using an average discount rate of 8.2% and recorded a debt discount of approximately $1.1 million at the issuance date. The debt discount is reflected as a reduction in the carrying amount of the Notes and amortized to interest expense through the respective maturity dates, using the effective interest method.

On April 24, 2024, the Company entered into a forbearance agreement with Veru (the “Original Forbearance Agreement”) due to the Company’s failure to repay the principal balance on the $5.0 million note payable that had a maturity date of April 19, 2024 (the “April Veru Note”). Pursuant to the Original Forbearance Agreement, Veru will forbear from exercising its rights and remedies under the April Veru Note as a result of this default, until March 31, 2025 (the “April 2024 Forbearance Period”).

 

Interest will accrue on any unpaid principal balance of the April Veru Note at a rate of 10% per annum, commencing on April 20, 2024 through the date that the outstanding principal balance under the April Veru Note is paid in full. Any such accrued interest will become immediately due and payable upon the earlier of (i) certain events of default under the April Veru Note or the $5.0 million note payable that matures on September 30, 2024 (the “September Veru Note”), (ii) a payment default under the September Veru Note and (iii) the final payment of any principal amount payable under the September Veru Note. No interest was to accrue under the September Veru Note during the April 2024 Forbearance Period unless an Event of Default (as defined in the Original Forbearance Agreement) occurs, in which case interest will accrue from and after the date on which such default occurs.

 

In consideration for Veru’s entrance into the Original Forbearance Agreement, the Company agreed to pay Veru:

 

  ● $50,000 of the principal due under the April Veru Note, which was paid on April 25, 2024, and up to $10,000 of out-of-pocket expenses incurred by Veru in connection with the Original Forbearance Agreement;

 

  ● 15% of (i) the monthly cash receipts of Proteomedix for the licensing or sale of any products or services, (ii) monthly cash receipts of the Company or any of its subsidiaries for the sales of Proclarix anywhere in the world, and (iii) monthly cash receipts of the Company or any of its subsidiaries for milestone payments or royalties from LabCorp; and

 

  ● 10% of the net proceeds from any financing or certain asset sale, transfer or licensing transactions that are consummated prior to March 31, 2025.

 

The Company also agreed to a general release of claims against Veru and its representatives arising out of or relating to any act or omission thereof prior to April 24, 2024.

 

The Company determined that the Original Forbearance Agreement should be accounted for as a modification of the April Veru Note and the September Veru Note in accordance with ASC 470-50, Debt - Modifications and Extinguishments (“ASC 470”), as the change in cash flows expected under the April Veru Note and the September Veru Note was not substantial. A new effective interest rate was established based on the carrying value of the original Notes and the revised cash flows and no gain or loss was recorded.

 

On September 19, 2024, the Company entered into an Amended and Restated Forbearance Agreement with Veru (the “Amended and Restated Forbearance Agreement” or “A&R Forbearance Agreement”), which amends and restates the Original Forbearance Agreement in its entirety. Pursuant to the A&R Forbearance Agreement, Veru will forbear from exercising its rights under both the April Veru Note and the September Veru Note, subject to the terms and conditions set forth below.

 

The A&R Forbearance Agreement extends the due date for the April 2024 and September 2024 Veru Notes until the earlier to occur of (i) June 30, 2025 or (ii) the occurrence of any Event of Default. The Amended and Restated Forbearance Agreement also effected certain modifications to the payment terms in the Original Forbearance Agreement and amended certain terms of the September Veru Note as summarized below.

 

Pursuant to the A&R Forbearance Agreement, the Company agreed to make the following required payments (the “Required Payments”) during the April 2024 Forbearance Period, first to accrued and unpaid interest under the April Veru Note and then any remainder to the outstanding principal amount of the April Veru Note:

 

  ● Interest at the rate of 10% per annum shall accrue on any unpaid principal balance of the April Veru Note commencing on April 20, 2024 through the date that the outstanding principal balance under the April Veru Note is paid in full;

 

  ● Monthly payments equal to 25% (increased from 15% in the Original Forbearance Agreement) of (i) the monthly cash receipts of Proteomedix for the licensing or sale of any products or services, (ii) monthly cash receipts of the Company or any of its subsidiaries for the sales of Proclarix anywhere in the world, and (iii) monthly cash receipts of the Company or any of its subsidiaries for milestone payments or royalties from LabCorp cash receipts of the Company of its subsidiaries from certain sale or licensing revenues or payments (the “Ordinary Cash Revenue”), which increased amount began October 20, 2024 for cash receipts in September 2024;
  ● Payment of 20% (increased from 10% in the Original Forbearance Agreement) of the net proceeds from certain financing or other transactions outside the ordinary course of business completed by the Company or any of its subsidiaries during the April 2024 Forbearance Period, which increased amount will begin for any net proceeds received after September 19, 2024; and

 

  ● The remaining balance of the April Veru Note will be due at the end of the April 2024 Forbearance Period.

 

The Company and Veru also agreed to the following amendments to the September Veru Note in the A&R Forbearance Agreement:

 

  ● As noted above, an extension of the maturity date to June 30, 2025;

 

  ● The accrual of interest at the rate of 10% per annum on any unpaid principal balance of the September Veru Note commencing on October 1, 2024 through the date that the outstanding principal balance under the September Veru Note is paid in full;

 

  ● Any amounts owed on the September Veru Note, including but not limited to unpaid principal and accrued interest, will be paid in cash or, upon the mutual written consent of Veru and the Company, in shares of the Company’s Common Stock or a combination of cash and the Company’s Common Stock;

 

  ● Following full repayment of all principal and interest under the April Veru Note, the Company will make the Required Payments first towards accrued and unpaid interest under the September Veru Note and then towards the remaining principal balance payable under the September Veru Note; and

 

  ● If the aggregate unpaid principal outstanding under the April Veru Note and the September Veru Note and all accrued and unpaid interest thereon is repaid in cash on or before December 31, 2024, then the total principal balance under the September Veru Note that will be payable by the Company in satisfaction of its obligations under the September Veru Note will be reduced from $5.0 million to $3.5 million.

 

The Company determined the A&R Forbearance Agreement should be accounted for as a modification of both the April and September Veru Notes in accordance with ASC 470-50, Debt - Modifications and Extinguishments (“ASC 470”), as the change in cash flows expected under the April Veru Note and the September Veru Note was not substantial. A new effective interest rate was established based on the carrying value of the original Notes and the revised cash flows and no gain or loss was recorded.

 

On November 26, 2024, the Company entered into another Amended and Restated Forbearance Agreement with Veru (the “November Amended and Restated Forbearance Agreement” or “November A&R Forbearance Agreement”), which amends and restates certain terms of the Amended and Restated Forbearance Agreement. Pursuant to the November A&R Forbearance Agreement, Veru agreed to waive the due date for payment of applicable Cash Receipt Payments (as such term is defined in the A&R Forbearance Agreement) generated in October 2024 until the Company receives funds of at least $97,000 pursuant to its equity line of credit facility with Keystone Capital Partners LLC. In exchange, the Company agreed to increase its payments to be made to Veru out of future financing and strategic transactions through June 30, 2025, from 20% to 25% of net proceeds generated from such transactions. All other terms of the A&R Forbearance Agreement with Veru remain the same. Management has evaluated and concluded that there is no accounting impact from the A&R Forbearance Agreement with Veru.

 

On March 31, 2025, Veru and the Company entered into a waiver agreement, pursuant to which Veru agreed to waive and extend the date for payment of the April Veru Note to April 14, 2025.

 

On April 23, 2025, Veru and the Company entered into a limited waiver agreement, pursuant to which Veru agreed to waive and extend the date for payment of the April Veru Note to June 30, 2025.

On June 30, 2025, Veru and the Company entered into a limited waiver agreement, pursuant to which Veru agreed to waive and extend the date for payment of the Veru Notes to July 31, 2025.

 

On July 31, 2025, Veru and the Company entered into a waiver agreement, pursuant to which Veru agreed to waive and extend the date for payment of the Veru Notes to August 14, 2025.

 

On August 7, 2025, Veru and the Company agreed to amend and restate the September Veru Note to increase the principal amount owed to Veru by $100,000 to an aggregate principal amount of $5.1 million and extend the maturity date to August 14, 2025. All other terms of the September Veru Note remained the same.

 

On August 14, 2025, Veru and the Company entered into a waiver agreement, pursuant to which Veru agreed to waive and extend the date for payment of the April Veru Note and the September Veru Note to August 31, 2025.

 

On August 28, 2025, Veru and the Company agreed to amend and restate the September Veru Note. Pursuant to the September Veru Note, the principal amount owed to Veru was increased by $100,000 to an aggregate principal amount of $5.2 million, and the maturity date was amended to September 19, 2025. All other terms of the September Veru Note remained the same.

 

On August 28, 2025, Veru and the Company also entered into a waiver agreement, pursuant to which Veru agreed to waive and extend the date for payment of the September Veru Note to September 19, 2025.

 

On September 22, 2025, approximately $8.8 million was payable to Veru under the Veru Notes and related amendments.

 

On September 22, 2025, the Company and Veru entered into a Settlement Agreement and Release (the “Veru Settlement Agreement”), pursuant to which Veru agreed to accept a cash payment of approximately $6.3 million (including interest accrued through receipt of the Settlement Amounts (as defined herein)), 3,125 shares of Series D Preferred Stock (as defined below) and 846,975 Series D Warrants (as defined below) from a Series D PIPE Financing (as defined below) entered between the Company and certain institutional investors on September 22, 2025 (such cash payment, shares of Series D Preferred Stock and Series D Warrants, collectively, the “Settlement Amounts”) in full satisfaction of all amounts due under the Veru Notes, as amended by all preceding amendments, forbearance agreements, and waivers, and Veru agreed that such acceptance constituted complete discharge of all obligations thereunder. The Settlement Agreement contains customary release provisions that upon timely delivery of the Settlement Amounts, Veru shall release all claims or actions against the Company. The transaction was accounted for as a debt extinguishment in accordance with ASC 405-20 and ASC 470-50. The Company derecognized the carrying amount of the Veru Notes and recognized a gain or loss on extinguishment equal to the difference between the reacquisition price—measured at the fair value of the cash and equity instruments transferred—and the net carrying value of the debt. The Company recognized a loss on extinguishment related to this transaction of $3,516,811 recorded within loss on extinguishment of notes payable in the accompanying condensed consolidated statement of operations and comprehensive loss for the three and nine months ended September 30, 2025.

 

On September 24, 2025, Veru confirmed receipt of all Settlement Amounts in satisfaction of all outstanding amounts, and all Veru Notes and related amendments were deemed cancelled and terminated, respectively, and of no further force or effect.  

 

During the three and nine months ended September 30, 2025, the Company recorded approximately $0.3 million and $0.8 million of interest expense, respectively, which includes accrued interest and amortization of the debt discount. The unamortized debt discount as of September 30, 2025 and December 31, 2024 was $0 and $5,000, respectively. As of September 30, 2025 and December 31, 2024, the Company has recorded accrued interest of approximately $0 million and $0.1 million, respectively, which is included in accrued expenses in the accompanying condensed consolidated balance sheets.

 

There are no future minimum principal payments on the Veru Notes as of September 30, 2025 as the Veru Notes are fully paid off and extinguished in accordance with the Veru Settlement Agreement.

Related Party Debenture

 

On January 23, 2024, the Company issued a non-convertible debenture (the “Debenture”) to the PMX Investor, a related party, in the principal sum of $5.0 million, in connection with the Subscription Agreement discussed in Note 7. The Debenture has an interest rate of 4.0% per annum, and the principal and accrued interest was originally payable in full upon the earlier of (i) the closing under the Subscription Agreement and (ii) June 30, 2024. Additionally, the $5.0 million subscription amount under the Subscription Agreement shall be increased by the amount of interest payable under the Debenture.

 

On April 24, 2024, the maturity date of the related party debenture was extended to October 31, 2024, through the execution of an extension agreement (the “Extension Agreement”) between the Company and the PMX investor. No other terms of the Debenture were modified in connection with the Extension Agreement.

 

The Company considered the guidance of ASC 470-60, Troubled Debt Restructuring by Debtors, and concluded that the Extension Agreement should be accounted for as a troubled debt restructuring as the Company is experiencing financial difficulty and since the effective borrowing rate under the Extension Agreement is less than the effective borrowing rate under the original agreement, which indicates that a concession is deemed to have been granted. This did not result in a gain on restructuring as the future undiscounted cash outflows required under the Extension Agreement exceed the carrying value of the Debenture immediately prior to the extension. A new effective rate was established based on the carrying value of the original Debenture and the revised cash flows.

 

In connection with the issuance of the Debenture, the Company incurred approximately $0.4 million in financing fees, which was recorded as a debt discount, and reflected as a reduction in the carrying amount of the Debenture. The debt discount is being amortized to interest expense through the maturity date. The Company did not incur any financing fees in connection with the Extension Agreement.

 

On September 24, 2024, the Company converted all unpaid principal and accrued interest due under the Debenture into 500,000 units, attributable to principal, and 13,424 units, attributable to accrued interest, upon the closing of the Subscription Agreement. Each unit consisted of 1 share of common stock and 0.30 pre-funded warrants at an exercise price of $0.04 per share. As a result of the transaction, 513,424 shares of common stock were issued, and 154,027 pre-funded warrants were issued. As of December 31, 2024, there is no outstanding balance or accrued interest remaining on the Debenture. The remaining unamortized debt discount was immediately expensed upon settlement.

 

The Company recorded approximately $0.2 million and $0.5 million of interest expense on the Debenture during the three and nine months ended September 30, 2024, respectively, which includes accrued interest and amortization of the debt discount. There was no such interest expense during the three and nine months ended September 30, 2025.

 

Insurance Financing

 

During the nine months ended September 30, 2025, the Company obtained financing for certain Director & Officer liability insurance policy premiums. The agreement assigns the lender a first priority lien on and security interest in the financed policies and any additional premium required in the financed policies.

 

The total premiums, taxes and fees financed are approximately $0.5 million, with an annual interest rate of 7.25%. In consideration of the premium payment by the lender to the insurance companies or the agent or broker, the Company unconditionally promised to pay the lender the amount financed plus interest and other charges permitted under the agreement. On September 30, 2025, the Company recognized approximately $0.05 million as an insurance financing note payable, which is now $0.05 million and included in the current portion of notes payable in the accompanying condensed consolidated balance sheets. The Company will pay the insurance financing through monthly installment payments of approximately $52,768, with the last payment for the note due on November 17, 2025.

Keystone Notes Payable

 

During the nine months ended September 30, 2025, the Company issued six subordinated promissory notes to Keystone Capital Partners, LLC, each with an original issue discount and payable upon the earlier of (i) receipt of sufficient proceeds from the Company’s Equity Line of Credit (“ELOC”) with the Investor or (ii) a specified maturity date. All notes are subordinated to the Company’s existing debt obligations to Veru, do not initially bear interest, and are subject to a late charge of 15% per annum on any unpaid amounts past due.

 

  ● On February 12, 2025, the Company issued a note with an aggregate principal amount of $117,647, including an original issue discount of $17,647. The note matures on November 12, 2025, unless prepaid earlier upon receipt of sufficient capital from other securities offerings (the “February Keystone Note”).

 

  ● On May 16, 2025, the Company issued a note with an aggregate principal amount of $294,118, including an original issue discount of $44,118. The note matures on February 16, 2026, subject to the same prepayment provisions (the “May Keystone Note”).

 

  ● On June 5, 2025, the Company issued a note with an aggregate principal amount of $147,059, including an original issue discount of $22,059. The note matures on March 5, 2026, subject to the same prepayment provisions (the “June Keystone Note”).

 

  ● On August 6, 2025, the Company issued a note with an aggregate principal amount of $117,647, including an original issue discount of $17,647. The note matures on March 6, 2026, subject to the same prepayment provisions (the “August 6 Keystone Note”).

 

  ● On August 28, 2025, the Company issued two notes with an aggregate principal amount of $58,824 each, including an original issue discount of $8,824 each. The notes mature on May 28, 2026, subject to the same prepayment provisions (the “August 28 Keystone Notes”).

 

On September 22, 2025, Keystone Capital Partners, LLC and the Company agreed to exchange the principal owed under the May Keystone Note, the June Keystone Note, the August 6 Keystone Note and the August 28 Keystone Notes for Series D Preferred Stock and Warrants in connection with the Series D PIPE Financing. The February Keystone Note has a balance as of September 30, 2025 of $113,725 and matures on November 12, 2025. The transaction was accounted for as a debt extinguishment in accordance with ASC 405-20 and ASC 470-50. The Company derecognized the carrying amount of the Keystone Notes and recognized a gain or loss on extinguishment equal to the difference between the reacquisition price, measured at the fair value of the cash and equity instruments transferred, and the net carrying value of the debt. The Company recognized a loss on extinguishment related to this transaction of $1,867,908 recorded within loss on extinguishment of notes payable in the accompanying condensed consolidated statement of operations and comprehensive loss for the three and nine months ended September 30, 2025.

 

During the three and nine months ended September 30, 2025, the Company recorded approximately $0.1 million and $0.1 million of amortization of the debt discount. The unamortized debt discount as of September 30, 2025 and December 31, 2024 was $4,000 and $5,000, respectively.