Long-Term Debt

12 Months Ended

Dec. 31, 2023

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

12.5% Senior Secured Notes

On July 15, 2019, the Company completed the private placement of up to $100,000 aggregate principal of its 12.5% Notes due 2025 and issued Warrants to purchase 2,000,000 shares of Common Stock, at $0.001 par value per share.

Upon closing of the Base Indenture, the Company issued $70,000 of the 12.5% (the "Initial Notes") along with the Warrants and rights of first offer (the “First Offer Rights”) to the noteholders participating in this transaction. Issuance of the Initial Notes and Warrants provided net proceeds of $66,082.

On November 3, 2020, the Company entered into the First Supplemental Indenture (the "First Supplemental Indenture" and, together with all other subsequent supplemental indentures and the Base Indenture, collectively, the "Indenture") by and among the Company and U.S. Bank National Association, as Trustee (the "Trustee") and Collateral Agent thereunder to the Base Indenture, by and between the Company and the Trustee. Under the Second Supplemental Indenture, dated November 20, 2020, the Company repaid $22,500 of its $70,000 outstanding 12.5% Notes from the upfront proceeds received under the Monetization Agreement. Further, the Company entered into an additional Purchase Agreement with its noteholders whereby the Company issued in aggregate $4,000 of additional 12.5% Notes (the "Additional Notes") in lieu of paying a prepayment premium to two noteholders on the early repayment of the 12.5% Notes discussed above. The result of these two transactions reduced the net balance of the Company's 12.5% Senior Notes outstanding in the aggregate to $51,500 at December 31, 2020, and such aggregate principal amount remained outstanding as of December 31, 2022. The $4,000 principal issuance would be repaid proportionally over the same maturities as the other 12.5% Notes. The Company also paid to one of its noteholders a $2,250 premium as result of the early retirement of debt.

The Company accounted for the $22,500 debt repayment as a debt modification of the 12.5% Notes. The fees paid to the noteholders inclusive of (i) $2,250 early premium prepayment and (ii) $4,000 issuance of Additional Notes in lieu of paying a prepayment penalty were recorded as additional debt discount, amortized over the remaining life of the 12.5% Notes using the effective interest method. Loan origination costs of $220 associated with the Additional Notes were expensed as incurred. Existing deferred discounts and loan origination fees on the 12.5% Notes are amortized as an adjustment of interest expense over the remaining term of modified debt using the effective interest method.

The First Supplemental Indenture contained a provision whereby, as the Company receives any cash proceeds from the Monetization Agreement, each noteholder has the right to require the Company to redeem all or any part of such noteholder’s outstanding 12.5% Notes at a repurchase price in cash equal to 112.5% of the principal amount, plus accrued and unpaid interest. This repurchase offer was capped at 30% of the cash proceeds received by the Company as the contingent milestones were attained, if any, up through June 30, 2025. A valuation study was performed by an independent third-party appraiser and updated as of December 31, 2022. Based on the valuation study, the put option was valued at $45 and has been recorded in Other non-current liabilities. The embedded put option was deemed to be a derivative under ASC 815 Derivatives and Hedging, which required the recording of the embedded put option at fair value subject to remeasurement at each reporting period. In addition, as of the closing of this transaction, the Company issued to the holders of the 12.5% Notes warrants to purchase 143,000 shares of the Company's Common Stock.

On August 6, 2021, pursuant to the Third Supplemental Indenture, the holders of the 12.5% extended to June 30, 2022 from December 31, 2021, the Company’s ability to access, at the Company’s option, $30,000 of 12.5% Notes re-openers under the Indenture.

On May 13, 2022, pursuant to the Fifth Supplemental Indenture, the holders of the 12.5% Notes further extended to March 31, 2023 from June 30, 2022, the Company's ability to access, at the Company's option, $30,000 of 12.5% Notes re-openers under the Indenture, subject to the full approval of Libervant by the FDA for sale in the United States, which full approval included U.S. market access for Libervant. Because full FDA approval was not obtained by March 31, 2023, the Company's option to access the re-openers expired on such date.

On October 7, 2021, the Company entered into the Fourth Supplemental Indenture, pursuant to which the amortization schedule for the 12.5% Notes was amended to provide for the date of the first principal payment to be extended from September 30, 2021 to March 30, 2023. The Fourth Supplemental Indenture did not change the maturity date of the 12.5% Notes or the interest payment obligation due under the 12.5% Notes. In connection with the Fourth Supplemental Indenture, the Company entered into a Consent Fee Letter with the holders of the 12.5% Notes (the “Consent Fee Letter”), pursuant to which the Company agreed to pay the holders of the 12.5% Notes an additional cash payment ("Consent Fee") of $2,700 in the aggregate, payable in four quarterly payments beginning May 15, 2022. As of December 31, 2022, the Company recorded the remaining Consent Fee to be paid of $675 as Notes payable, current, on its Consolidated Balance Sheet. The payment was made in February 2023.

The 12.5% Notes provided a stated fixed interest rate of 12.5%, payable quarterly in arrears, with the final quarterly principal repayment of 12.5% Notes due at maturity on June 30, 2025. As of December 31, 2022, the Company recorded its principal payments due as Notes Payable, current and Notes Payable, net on its Consolidated Balance Sheet.

The Company could have elected, at its option, to redeem the 12.5% Notes at any time at premiums that range from 101.56% of outstanding principal if prepayment occurs on or after the fifth anniversary of the issue date of the Initial Notes to 112.50% if payment occurs during the third year after the issuance of the Notes. The Indenture also included change of control provisions under which the Company may have been required to redeem the 12.5% Notes at 101% of the remaining principal plus accrued interest at the election of the noteholders.

Collateral for the loan under the 12.5% Notes consisted of a first priority lien on substantially all property and assets, including intellectual property, of the Company. This secured obligation provided payment rights that are senior to all existing and future subordinated indebtedness of the Company and provides noteholders with perfected security interests in substantially all of the Company’s assets.

On November 4, 2022 and December 16, 2022, the Company issued two separate notices of partial redemption pursuant to the Indenture, dated as of July 15, 2021, between the Company and the Trustee and collateral agent governing the 12.5% Notes. Pursuant to each of the notice of partial redemption, the Company gave holders of the 12.5% Notes notice that the Company intended to redeem $3,765 and $1,882, respectively, of its outstanding 12.5% Notes at a redemption price pursuant to the formula set forth in the Indenture governing the 12.5% Notes, plus accrued and unpaid interest and fees. Such partial redemptions occurred in January and February 2023, respectively. The Company also paid $353 in a prepayment premium as a result of the early retirement of debt which was reflected as a loss on extinguishment of debt in Loss on the Extinguishment of Debt in the Company’s Consolidated Statements of Operations and Comprehensive Loss. Further, during 2023 the Company made three scheduled principal payments totaling $11,463.

Amortization expense arising from deferred debt issuance costs and debt discounts related to the 12.5% Notes for the years ended December 31, 2023 and December 31, 2022 was $13 and $16, respectively. Unamortized deferred debt issuance costs and deferred debt discounts related to the 12.5% Notes were $0 and $27 as of December 31, 2023 and December 31, 2022, respectively.

On November 1, 2023, the Company issued the 13.5% Notes, as described below, and used the proceeds from the issuance to repay the outstanding principal balance under the 12.5% Notes of $36,014, including accrued and unpaid interest and a redemption fee. The Company accounted for this transaction as an extinguishment of debt and recognized a debt extinguishment charge of $1,029 for the year ended December 31, 2023. The debt extinguishment charge is included in Loss on the extinguishment of debt in the Company’s Consolidated Statements of Operations and Comprehensive Loss.

13.5% Senior Secured Notes

On November 1, 2023, the Company entered into an Indenture Agreement with certain institutional investors (the “Note Holders”) and issued $45,000 aggregate principal amount of its 13.5% Notes due 2028. The Company received net proceeds of approximately $4,326 from this transaction after the repayment of the 12.5% Notes and deduction of debt discount, and debt issuance costs.

The 13.5% Notes are senior secured obligations of the Company and mature on November 1, 2028. The 13.5% Notes bear interest at a fixed rate of 13.5% per year, payable quarterly commencing on December 30, 2023 with the first interest payment due on January 2, 2024. On each payment date commencing on June 30, 2026, the Company will pay an installment of principal of the 13.5% Notes pursuant to a fixed amortization schedule, along with the applicable Exit Fee. The Exit Fee totals $2,000.

The Company may, at its option, redeem the 13.5% Notes in full or in part:

a.if such redemption occurs prior to November 1, 2025, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, plus the applicable Exit Fee, plus an Applicable Premium which is the greater of

i.1.0% of the principal redeemed; and

ii.the amount, if any, by which the present value of the principal to be redeemed on November 1, 2025, plus all required interest due on such date, computed using a discount rate equal to the Treasury Rate, plus 100 basis points, exceeds the amount of principal to be redeemed; and

b.if such redemption occurs after November 1, 2025, the redemption price is equal to 108.50% of the principal amount plus accrued and unpaid interest, plus the applicable Exit Fee.

If the Company undergoes a change of control, the Note Holders may require the Company to repurchase for cash all or any portion of the 13.5% Notes at a change of control repurchase price equal at 108.5% plus the Exit Fee of the remaining principal, plus accrued interest at the election of the Note Holders.

The Indenture permits the Company, upon the continuing satisfaction of certain conditions, including that the Company (on a consolidated basis) has at least $100,000 of net revenues for the most recently completed twelve calendar month period, to enter into an asset-based borrowing facility not to exceed $10,000 (the “ABL Facility”). The ABL Facility may be collateralized only by assets of the Company constituting inventory, accounts receivable, and the proceeds thereof.

In connection with the issuance of 13.5% Notes, the Company and the Note Holders entered into the Royalty Right Agreements dated as of November 1, 2023, which provides Note Holders:

a.a tiered royalty between 1.0% and 2.0% of annual worldwide net sales of Anaphylm (epinephrine) Sublingual Film for a period of eight years from the first sale of Anaphylm on a global basis, and

b.a tiered royalty between 1.0% to 2.0% of annual worldwide net sales of Libervant (diazepam) Buccal Film until the earlier of (1) the first sale of Anaphylm and (2) eight years from the first sale of Libervant.

Both, the 13.5% Notes and Royalty Right Agreements, represent freestanding instruments which were issued in conjunction with each other. They are classified as debt within the scope of ASC 470, Debt and are subsequently measured on an amortized cost basis.

The initial fair value measurement of the Royalty Right Agreements was determined based on significant unobservable inputs, including the discount rate, estimated probabilities of success, and the estimated amount of future sales of Anaphylm and Libervant. These inputs are derived using internal management estimates developed based on third-party data and reflect management’s judgements, current market conditions, and forecasts.

The Royalty Right Agreements fair value is estimated by applying probability-weighted cash flows for future sales, which are then discounted to present value. Changes to fair value of the Royalty Rights Agreements can result from changes to one or a number of the aforementioned inputs. A significant change in unobservable inputs could result in a material increase or decrease to the effective interest rate of the Royalty Right Agreements liability. During the remainder of 2023, there were no material changes to the significant unobservable inputs used to recognize the Royalty Right Agreements liability.

The following table summarizes the significant unobservable inputs used in the initial fair value measurement of the Royalty Right Agreements as of December 31, 2023:

	Valuation Methodology	Significant Unobservable Input	Weighted Average (range, if applicable)
		Discount Rate	15%
Royalty Right Agreements	Probability weighted income approach	Probability of Success	75%
		Projected Years of Payments	2025	-	2033

Since the Royalty Right Agreements were issued in connection with the 13.5% Notes, the Company allocated the proceeds to the two instruments based on their relative fair values. The Company allocated approximately $13,856 to the Royalty Right Agreements. The Company determined the allocated fair value by calculating the present value of estimated future royalties to be paid to Note Holders over the life of the arrangement.

The excess of future estimated royalty payments of $56,926 over the $13,856 of allocated fair value is recognized as a discount related to the Royalty Right Agreements and is amortized as interest expense using the effective interest method. Consequently, the Company calculated an imputed rate of interest on the unamortized portion of the Royalty Right Agreements liability, which was approximately 9.68% as of December 31, 2023.

The allocated amounts of $13,856 when combined with the Exit Fee of $2,000, original issue discount of $1,125 and debt issuance costs of $3,517, resulted in debt discount of $20,498. The debt discount is being amortized over the term of 13.5% Notes using the effective interest method.

Amortization expense arising from the discounts related to the 13.5% Notes and Royalty Right Agreements for the year ended December 31, 2023 was $833 and $905, respectively.

Unamortized discounts totaled $17,665 for the 13.5% Notes and $42,165 for Royalty obligations as of December 31, 2023.

Long-term notes and unamortized debt discount balances are as follows:

	December 31,
	2023		2022
Total outstanding notes	$	45,000	$	51,500
Unamortized discount, including Exit Fee	(17,665)		(27)
Current portion of long-term debt	—		(18,025)
Notes payable, long-term	$	27,335	$	33,448
Finance lease	173		—
Notes payable, net	$	27,508	$	33,448

	December 31,
	2023
Royalty obligations	$	56,926
Unamortized discount	(42,165)
Royalty obligations, net	$	14,761

Scheduled principal payments on the 13.5% Notes as of December 31, 2023 are as follows:

2024	$	—
2025	—
2026	9,540
2027	14,535
2028	20,925
Total	$	45,000