LONG-TERM DEBT

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

LONG-TERM DEBT

LONG-TERM DEBTOn July 29, 2019, Foamix entered into a Credit Agreement (the "Credit Agreement") to secure up to $50.0 million from two lenders, one of which is a significant stockholder of the Company and is considered a related party, and a Securities Purchase Agreement with one of the lenders for gross proceeds of approximately $14.0 million, before deducting offering expenses (see "Note 12 - Share Capital" for more information). On March 9, 2020, the Company entered into an Amended and Restated Credit Agreement and Guaranty (as further amended on August 5, 2020, the "Amended and Restated Credit Agreement"),

whereby the Company guaranteed the indebtedness obligations of the borrower and granted a first priority security interest in substantially all of the Company's assets for the benefit of the lenders.

The term loans drawn under the Amended and Restated Credit Agreement were comprised as follows: (a) $15.0 million that was funded on July 29, 2019 (the “Tranche 1 Loan”) and (b) $20.0 million that was funded on December 17, 2019 (the “Tranche 2 Loan”). The Tranche 2 Loan was borrowed following the FDA’s approval of the Company’s NDA for AMZEEQ and listing of AMZEEQ in the FDA’s “Orange Book,” in addition to maintaining its arrangements with a third party for the commercial supply and manufacture of AMZEEQ. Subject to any acceleration as provided in the Amended and Restated Credit Agreement, including upon an event of default (as defined in the Amended and Restated Credit Agreement), the loans will mature on July 29, 2024 and bear interest equal to the sum of (A) 8.25% (subject to increase in accordance with the terms of the Amended and Restated Credit Agreement) plus (B) the greater of (x) the one-month LIBOR as of the second business day immediately preceding the first day of the calendar month or the date of borrowing (if such loan is not outstanding as of the first day of the calendar month), as applicable, and (y) 2.75%. A fee in an amount equal to 1.0% of the aggregate principal amount of all loans made on any given borrowing date shall be payable to the lenders.

The loans were scheduled to mature on July 29, 2024. However, following discussions with the Company's lenders regarding the revenue targets included in the Amended and Restated Credit Agreement, the revenue expected to be generated for the trailing twelve month period ended June 30, 2021 and the Company's strategic business review discussed in Note 1, the Company determined to prepay its outstanding indebtedness in addition to a 4% prepayment fee and accrued but unpaid interest in the total amount of approximately $36.5 million on August 11, 2021. Following the prepayment, the Amended and Restated Credit Agreement and the security interests thereunder were terminated. As of December 31, 2022 there was no debt outstanding.

Perceptive Credit Holdings II, LP ("Perceptive") was one of the lenders and the administrative agent under the Amended and Restated Credit Agreement. As of August 11, 2021, the date of the prepayment, affiliates of Perceptive were holders of more than 5% of the Company's outstanding common stock. In connection with the prepayment of the Company's indebtedness, Perceptive received $18.3 million, representing their portion of the principal amount, interest and prepayment premium. As of December 31, 2021, Perceptive was no longer a related party.

In addition, on July 29, 2019, the lenders under the Credit Agreement were issued warrants to purchase up to an aggregate of 61,111 of Foamix ordinary shares, at an exercise price of $37.62 per share (the “Warrants”), which represented the five-day volume weighted average price of the Foamix ordinary shares as of the trading day immediately prior to the issuance of the Warrants. In connection with the completion of the Merger on March 9, 2020, the applicable exchange ratio (the "Exchange Ratio") was applied to the Warrants such that they became exercisable for 36,202 shares of the Company's common stock, and the exercise price was adjusted to $63.54. On April 6, 2020, following the Phase 3 PN Trial results, the Warrants were further adjusted for the conversion of the contingent stock rights and reverse stock split. As of December 31, 2022, the Warrants were exercisable for 27,509 shares of the Company's common stock with an exercise price of $76.78 per share. Payment of the exercise price will be made, at the option of the holder, either in cash or as a reduction of common stock issuable upon exercise of the Warrant, with an aggregate fair value equal to the aggregate exercise price ("cashless exercise"), or any combination of the foregoing. The Warrants are exercisable pursuant to the terms, and subject to the conditions, thereof and expire on July 29, 2026. Any Warrants left outstanding will be cashless exercised on the Warrants' expiration date, if in the money. The Warrants issued were classified as equity in accordance with ASC 815-40. Proceeds received under the Tranche 1 Loan were allocated to the Warrants and the Tranche 1 Loan on a relative fair value basis. The exercise price of the Warrants will be adjusted in the event of issuances of common stock at a price lower than the exercise price of the warrants then in effect (the “Down Round Feature”). During the years ended December 31, 2022 and 2021, the Down Round Feature was triggered due to the price per share received from the issuance of common stock. Refer to Note 11 - Mezzanine and Shareholders' Equity for further information on the impact of the Down Round Feature. The Warrants expire on July 29, 2026.

During the year ended December 31, 2021 the Company recorded interest expense of $5.6 million comprised of interest on debt of $3.8 million and discount cost of $1.8 million. The interest expense includes a debt prepayment fee of $1.4 million and the write-off of discount costs of $1.6 million associated with the Company's prepayment of outstanding indebtedness resulting in a total extinguishment loss of $3.0 million.