v3.25.2
Notes Payable
 6 Months Ended
Jun. 30, 2025
Notes Payable [Abstract]  
NOTES PAYABLE

6. NOTES PAYABLE

 

The Company entered into the Avenue Financing, the Yorkville note, the Related Party note and financing arrangements for a portion of its Directors and Officers (“D&O”) insurance premiums, as follows (in thousands):

 

           Principal Repayments   Outstanding Balance 
   Amount       Six Months Ended
June 30,		   June 30,   December 31, 
   Financed   Interest Rate   2025   2024   2025   2024 
Avenue Capital Note Principal and Final Payment Fee  $8,500    Prime +5.25%  $
-
   $
-
   $9,250   $
-
 
Yorkville Convertible Notes, at fair value   11,500    0.0%   2,365    2,300    
-
    2,365 
2024 Insurance Note   596    8.4%   360    
-
    62    422 
New 2023 Insurance Note   631    8.6%   
-
    436    
-
    
-
 
2023 Insurance Note   151    9.7%   
-
    
-
    
-
    
-
 
             $2,725   $2,736   $9,312   $2,787 
Less: current portion of notes payable                       (62)   (2,787)
Unamortized debt discounts and debt issuance costs                       (1,618)   
-
 
Notes payable. long term                      $7,632   $
-
 

 

Avenue Capital Financing

 

On March 24, 2025, the Company completed the Avenue Financing, with an initial draw-down of $8.5 million.

 

The term of the Avenue Financing is for three years, with an interest-only payment period of no less than 15 months, which can be extended to 24 months upon achieving the milestones for the second financing tranche. The second financing tranche, which includes an additional $6.5 million in debt financing from Avenue Capital Group is contingent upon; (i) FDA clearance of the DeepView System and (ii) the Company completing a $7.0 million equity raise. The borrowings under the Avenue Financing accrue interest at a variable amount per annum equal to the greater of (i) the sum of (A) the Prime Rate plus (B) 5.25%, and (ii) 12.75%, and they mature on March 1, 2028 (the “Maturity Date”). In addition, on the Maturity Date a final payment of $0.8 million is due to Avenue Capital Group and is accrued as debt as of June 30, 2025.

 

Up to $2.0 million of the borrowings under the Avenue Financing are convertible at the lender’s option, into a number of shares of common stock at a price per share equal to 120% of the exercise price of the Avenue Warrants discussed below. Pursuant to the guidance in ASC 815-40, Contracts in Entity’s Own Equity, the Company evaluated whether the conversion feature needed to be bifurcated from the host instrument as a freestanding financial instrument. Under ASC 815-40, to qualify for equity classification (or non-bifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer’s own stock and (2) meet the requirements of the equity classification guidance. Based upon the Company’s analysis, it was determined the conversion option is indexed to its own stock and also met all the criteria for equity classification. Accordingly, the conversion option is not required to be bifurcated from the host instrument as a derivative.

 

As part of the Avenue Financing the Company issued 768,072 warrants to Avenue Capital Group which was equal to 8.5% of the total funding commitment. The Avenue Warrants have an exercise price equal to the lower of $1.66 per share and the lowest price per share paid to the Company in cash for common stock through December 31, 2025. The Avenue Warrants were determined to be classified as a liability instrument as certain terms preclude them from being considered indexed to the Company’s Common Stock.

 

The proceeds of Avenue Financing of $8.3 million, net of $47,000 in borrowing costs, were first allocated to the fair value of the Avenue Warrants, with the residual proceeds being allocated to the debt. The difference between debt proceeds and the amount of those proceeds allocated to debt gave rise to a debt discount of $0.7 million. The discount amount due to the Avenue Warrants of $0.7 million along with the loan fees allocated to the loan of $1.0 million, which includes the final payment of $0.8 million, for an aggregate debt discount and debt issuance costs of $1.7 million as shown in the table above, will be amortized as interest expense through maturity using the effective interest method. The portion of loan fees allocated to the Avenue Warrants, of $22,000, were expensed during the six months ended June 30, 2025 as borrowing related costs in the consolidated statement of operations and comprehensive loss.

Repayment of Yorkville Convertible Notes

 

During the six months ended June 30, 2025, the Company paid the remaining $2.4 million of the Yorkville Convertible Notes of which $1.2 million was settled in cash and $1.2 million was settled in shares of common stock.

 

Insurance Notes

 

The Company determined that the carrying amounts of all of the insurance notes approximate fair value due to the short-term nature of borrowings and current market rates of interest.