Annual report pursuant to Section 13 and 15(d)

Outstanding Debt

Outstanding Debt
12 Months Ended
Dec. 31, 2023
Debt Disclosure [Abstract]  
Outstanding Debt Outstanding Debt
2023 Secured Mortgage Loan

On December 20, 2023, the Company's wholly-owned subsidiary PREH entered into an Open-End Mortgage Agreement (the "Mortgage Agreement"). The Mortgage provided for a loan of $3.3 million (the "Mortgage Loan") with stated maturity date on January 6, 2034, bore a fixed interest rate of 8.25% per annum and required monthly mortgage payments of principal and interest of $25,000. The obligations under the Mortgage Agreement were secured by PREH's certain real property in Pennsylvania. The Company incurred $341,000 issuance cost, which was recognized as a debt discount and will be amortized using the effective interest method over the term of the Mortgage Loan. The Company retains $540,000 cash in an escrow account which was recognized as a restricted cash on the Company's consolidated balance sheet as of December 31, 2023.
2023 Unsecured Promissory Note Payable
On January 26, 2023, the Company issued an unsecured promissory note (the “2023 Note”) and guaranty for an aggregate principal amount of $7.6 million. The 2023 Note is due and payable on January 27, 2026, the third anniversary of the date on which the 2023 Note was funded (the “Closing Date”), and accrues interest at a rate of 10% per year from the Closing Date, payable on a quarterly basis, until the 2023 Note is repaid in full. The Company has the right to prepay the 2023 Note at any time after the Closing Date and prior to the maturity date without premium or penalty upon providing seven days’ written notice to the note holder. Repayment of the 2023 Note has been guaranteed by the Company’s wholly-owned subsidiary, Pharmaloz Manufacturing, Inc. In addition to the 2023 Note, the Company issued warrants to purchase 76,000 shares of the Company's common stock at an exercise price of $9.00 for a term of 5 years, vesting immediately. The warrants were valued at $0.4 million fair value, using the Black-Scholes option pricing model to calculate the grant date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 81.5%, risk free interest rate of 3.62% and expected warrant life of 5 years. The relative fair value of the warrant was $0.4 million and was recorded as a discount to the note payable in accordance with FASB ASC 835-30-25, Recognition, and is being accreted over the term of the note payable for financial statement purposes. As of December 31, 2023, the unpaid principal balance of the 2023 Note was $7.3 million, net of debt discount of $0.3 million.
2020 Unsecured Convertible Notes Payable
On September 15, 2020, the Company issued two unsecured, partially convertible, promissory notes (the “September 2020 Notes”) for an aggregate principal amount of $10.0 million to two investors (collectively, the “Lenders”).
On February 28, 2022, the Company entered into a letter agreement (the “Letter Agreement”) with one of the Lenders providing for the payoff of its September 2020 Note in the principal amount of $2.0 million.
Pursuant to the terms of the Letter Agreement, (i) the Lender converted $0.6 million of the principal amount due to him under his September 2020 Note into 200,000 shares of Company common stock (the “Conversion Shares”) at a price of $3.00 per share as provided for under the terms of the September 2020 Note (the “Conversion”), (ii) the Company paid to the Lender $1.4 million in cash, representing $1.4 million of the remaining principal under the September 2020 Note following the Conversion plus $41,000 in accrued and outstanding interest under the September 2020 Note, and (iii) the Company repurchased the Conversion Shares at a price of $5.75 per share for an aggregate amount of $1.2 million (for a total aggregate payment to the Lender of $2.6 million).
In November 2022, the Company paid the remaining Lender $5.6 million in principal on the remaining September 2020 Note.
On September 10, 2023, the Lender converted the remaining $2.4 million principal into 800,000 shares of the Company's common stock. The September 2020 Note was settled in full as of December 31, 2023.
For the year ended December 31, 2023 and 2022, the Company incurred $0.8 million and $0.8 million, respectively, in interest expense under the September 2020 Notes.