Loan and Security Agreement

3 Months Ended

Mar. 31, 2025

Debt Disclosure [Abstract]

Loan and Security Agreement

Note 8. Loan and Security Agreement

Hercules Capital, Inc.

For the purposes of this Note 8, capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement (as defined below).

Fifth Amendment to the Loan Agreement

On September 30, 2024, the Company entered into a Fifth Amendment (the “Fifth Amendment”) to its Loan and Security Agreement, dated as of September 25, 2020 (as amended by that certain First Amendment to Loan and Security Agreement, dated as of October 14, 2021, as further amended by the Second Amendment to Loan and Security Agreement, dated as of March 27, 2022, as further amended by the Third Amendment to Loan and Security Agreement, dated as of January 9, 2023, and as further amended by the Waiver and Fourth Amendment to Loan and Security Agreement, dated as of May 8, 2023) (the “Loan Agreement”) with Hercules Capital, Inc., a Maryland corporation (“Hercules”), in its capacity as administrative agent and collateral agent, and the other financial institutions or entities party thereto as lenders (collectively, the “Lenders”), with respect to the term loan thereunder (the “2020 Term Loan”).

The Fifth Amendment amended the terms of the Loan Agreement to, among other things: (i) increase the Tranche 3 Commitment from $75.0 to $80.0 million; (ii) extend the availability periods of Tranche 1D to June 15, 2025 and that of Tranche 1E to December 15, 2025, as set forth in greater detail in the Fifth Amendment; (iii) alter the terms of Performance Covenant A, Performance Covenant B, and Performance Covenant C and also add a Performance Covenant D, as set forth in greater detail in the Fifth Amendment; (iv) conditionally waive the requirement that the Company maintain Qualified Cash in an amount greater than or equal to the sum of $30.0 million plus the Qualified Cash A/P Amount at all times during such periods of time that the Company’s Market Capitalization exceeds $1.5 billion; and (v) permit Axsome Malta Ltd. (“Axsome Malta”) to request an Advance from the Lenders up to a certain amount to the extent that the Company may request an Advance in such amount and to increase the amount of Cash that Axsome Malta may hold outside of the United States, as set forth in greater detail in the Fifth Amendment.

The Waiver and Fourth Amendment (the “Fourth Amendment”) to the Loan Agreement with Hercules and the Third Amendment (the “Third Amendment”) to the Loan Agreement with Hercules incorporate the following amendments:

•The increase of cash held by Axsome Malta outside of the United States from $3.0 million to $15.0 million for a 45-day period after the closing of the Fourth Amendment and to $10.0 million thereafter;

•The waiver of any purported default with respect to the amount of cash held by Axsome Malta prior to the date of the Fourth Amendment;

•In August 2023, Hercules granted the Company a waiver to the Fourth Amendment, permitting Axsome Malta to hold up to $12.5 million in Cash outside of the United States until December 31, 2023;

•Extend the maturity date to January 1, 2028, unless the Company meets certain revenue targets as described in the Loan Agreement, in which case the Company can extend the maturity date to January 1, 2029;

•Increase the aggregate principal amount under the Loan Agreement from $300.0 million to $350.0 million;

•Subject to the terms and conditions in the Loan Agreement, change the term loan advance amounts and availability dates under the Tranche 1 Advance through Tranche 5 Advance, including increasing the Tranche 1 Advance from one tranche of $95.0 million to five sub-tranches of $95.0 million, $55.0 million, $30.0 million, $35.0 million, and $35.0 million, respectively, changing the Tranche 2 Advance from three sub-tranches of $35.0 million, $35.0 million, and $30.0 million, respectively, to one tranche of $25.0 million, changing the Tranche 3 Advance from two sub-tranches of $15.0 million and $5.0 million, respectively, to one tranche of $75.0 million, and removing the Tranche 4 Advance and Tranche 5 Advance entirely;

•Revise the interest rate applicable to extensions of credit under the Loan Agreement to equal (a) if the prime rate is greater than or equal to 7.00%, the greater of either (i) the prime rate plus 2.20%, and (ii) 9.95%, but in no event greater than 10.70%, and (b) if the prime rate is less than 7.00%, 9.70%;

•Increase the minimum cash requirement of the Company to the sum of $30.0 million plus the Qualified Cash A/P Amount; and

•Require the Company to pay a facility fee equal to 0.75% of the amount of principal actually funded pursuant to the Tranche 1B Advance, Tranche 1C Advance, Tranche 1D Advance, Tranche 1E Advance, Tranche 2 Advance, and Tranche 3 Advance.

As of March 31, 2025, the Company had allowed Tranche 2, which totaled $25.0 million, to expire undrawn.

On October 14, 2021, the Company entered into a First Amendment to the Loan and Security Agreement with Hercules. On March 27, 2022, in connection with the Acquisition (as described above), the Company entered into a Second Amendment to the Loan and Security Agreement (the “Second Amendment”) with Hercules. The Second Amendment closed on May 9, 2022, concurrently with the closing of the Acquisition.

As collateral for the obligations, the Company has granted to Hercules a senior security interest in all of the Company’s right, title, and interest in, to and under all of the Company’s property, inclusive of intellectual property, which includes one of the Company’s existing license agreements (the “License Agreement”) with Antecip, an entity owned by Axsome’s Chief Executive Officer and Chairman of the Board, Herriot Tabuteau, M.D., subject to limited exceptions. Antecip consented to the collateral assignment of the License Agreement, among other things, under a direct agreement (the “Direct Agreement”) with the Company, Antecip and Hercules.

The Loan Agreement contains customary representations, warranties and covenants, including covenants by the Company limiting additional indebtedness, liens (including a negative pledge on intellectual property and other assets), guaranties, mergers and consolidations, substantial asset sales, investments and loans, certain corporate changes, transactions with affiliates and fundamental changes. At the initial closing, there were no applicable financial covenants contained in the Loan Agreement. Effective upon closing of the Fifth Amendment in September 2024, the following limited financial covenants apply:

•The Company at all times must maintain Qualified Cash in an aggregate amount greater than or equal to $30.0 million plus the Qualified Cash A/P Amount; provided that compliance with such covenant shall be conditionally waived during such periods of time that the Company’s Market Capitalization exceeds $1.5 billion.

•The Company must meet, beginning June 30, 2023, any of the following conditions: (A) ensure that at all times its market capitalization exceeds $1.0 billion and that it maintains Qualified Cash in an amount not less than 30% of the sum of the outstanding principal amount of the Term Loan Advances plus the Qualified Cash A/P Amount, (B) ensure that at all times that it maintains Qualified Cash in an amount not less than 50% of the sum of the outstanding principal amount of the Term Loan Advances plus the Qualified Cash A/P Amount, or (C) ensure that at all times its market capitalization exceeds $1.5 billion. Alternatively, the Company must, beginning with fiscal quarter ending September 30, 2024, and for each quarter thereafter, achieve T6M Net Product Revenue in an amount equal to at least the amount set forth on Schedule 7.20(b) of the Loan Agreement opposite the last day of each fiscal quarter identified in the table therein, tested on a quarterly basis.

•Axsome Malta, a company organized under the laws of the Republic of Malta, may request an Advance from the Lenders up to a certain amount to the extent that the Company may request an Advance in such amount, and Axsome Malta may not hold Cash outside of the United States in excess of the sum of $10.0 million and the aggregate outstanding principal amount of Advances drawn by Axsome Malta.

•Restrictions on the Company’s ability to incur additional indebtedness, pay dividends, encumber its intellectual property, or engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses, with certain exceptions.

The Company’s obligations under the Loan Agreement are subject to acceleration upon the occurrence of specified events of default, including payment default, insolvency and a material adverse change in the Borrower’s business, operations or financial or other condition.

In addition, the Company is required to pay certain end of term charges, including (A) an initial end of term charge of $4.45 million and (B) a subsequent end of term charge of (i) 1.10% of the aggregate amount of all Tranche 1A Advances plus (ii) 4.95% of the aggregate amount of all term loan advances (other than Tranche 1A Advances) funded minus (iii) any charges paid by the Borrower to the Lenders related to partial prepayments of the outstanding Secured Obligations. The end of term charges are being accreted into interest expense using the effective interest rate method over the term of the loan.

If certain maturity extension conditions are satisfied, the Company must pay an extension end of term charge equal to 1.00% of the aggregate amount of all Term Loan Advances outstanding as of the date on which the maturity extension conditions are satisfied, in addition to the end of term charges described above.

The Company may, at its option prepay the term loans in full or in part, subject to a prepayment penalty equal to (i) 2.0% of the Advance amount prepaid if the prepayment occurs prior to February 1, 2024, (ii) 1.5% of the Advance amount prepaid if the prepayment occurs on or after February 1, 2024 but prior to February 1, 2025, and (iii) 1.0% of the Advance amount prepaid if the prepayment occurs on or after February 1, 2025 but prior to February 1, 2026.

The Company evaluated whether the Third Amendment entered into in January 2023 represented a debt modification or extinguishment in accordance with ASC 470-50, Debt – Modifications and Extinguishments. As the present value of the cash flows under the terms of the Third Amendment is less than 10% different from the remaining cash flows under the terms of the Second Amendment, the Third Amendment was accounted for as a debt modification. The unamortized balance of debt discount costs incurred in connection with those loans and additional debt discount costs incurred in connection with entry into the Third Amendment are being amortized through maturity in January 2028 utilizing the effective interest rate method.

The Company also evaluated whether the Fifth Amendment entered into September 2024 represented a debt modification or extinguishment in accordance with ASC 470. As the terms of the Fifth Amendment are not substantially different as compared to that of the Fourth Amendment, the Company treated the amendment as a debt modification.

Loan Interest Expense and Amortization

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

	March 31, 2025			December 31, 2024
Total outstanding debt	$	180,000		$	180,000
Add: accreted final payment fee		4,478			4,085
Less: unamortized debt discount, long-term		(3,101	)		(3,375	)
Less: current portion of long-term debt		—			—
Loan payable, long-term	$	181,377		$	180,710

The book value of debt approximates its fair value given its variable interest rate.

Interest expense, amortization of the final payment fee, and amortization of the debt discount related to the issuance costs and warrants for the Company’s debt are as follows:

	Three months ended March 31,
	2025		2024
Interest expense	$	4,478	$	4,869
Amortization of final payment fee		393		349
Amortization of debt discount related issuance costs and warrants		274		270

Scheduled principal payments on outstanding debt, as of March 31, 2025, are as follows:

2025	$	—
2026		—
2027		—
2028		180,000
2029		—
Thereafter		—
Total principal payments outstanding	$	180,000