What changed in this filing

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Item 9A. Controls and Procedures

2024-03-22 compared with 2023-03-16 · 335 added, 185 removed, 675 unchanged (44% of the section changed)

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Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and

procedures as of December 31, 2022.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC.

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Attestation Report of the Registered Public Accounting Firm

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm on internal control over financial reporting due to an exemption established by the JOBS Act for “emerging growth companies.”

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm on internal control over financial reporting as we are a “non-accelerated filer” as defined under SEC rules.

Changes in Internal Control over Financial Reporting

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Other Information

(a) On March 20, 2024 (the “Effective Date”), we entered into a Fourth Amendment (the “Fourth Amendment”) to the Credit Agreement and Guaranty (as amended, the “Credit Agreement”) by and among the Company, as the borrower, certain subsidiaries of the Company from time to time party thereto as subsidiary guarantors, the lenders party thereto (the “Lenders”), and Oaktree Fund Administration LLC (“OFA”) as administrative agent (the “Administrative Agent”), pursuant to which the Lenders waived the covenant that we not receive a report and opinion from our independent registered public accounting firm that contains a “going concern” or similar qualification with respect to our financial statements for the year ended December 31, 2023.

Accordingly, while our independent registered public accounting

firm’s report contained in this Annual Report on Form 10-K contains a “going concern” explanatory paragraph, it does not constitute an event of default under the Credit Agreement.

The Fourth Amendment includes a covenant that we will receive, (i) after the Effective Date and on or before April 15, 2024, at least $25,000,000 in gross proceeds from the issuance of our common stock, warrants and/or pre-funded warrants, and/or in non-refundable cash consideration from partnering transactions entered into after the Effective Date (so long as such partnering transactions would not require us or any of our subsidiaries to make any cash investments in connection with the partnering transactions and no such cash investments are made), and (ii) after the Effective Date and on or before November 30, 2024, at least $50,000,000 (for the avoidance of doubt, inclusive of amounts previously counted toward the preceding clause (i)) in gross proceeds from the issuance of our common stock, warrants and/or pre-funded warrants, and/or in cash and/or non-cash consideration (measured at fair market value, as determined by the Administrative Agent in its sole discretion ) from partnering transactions entered into after the Effective Date.

Failure to perform this covenant would constitute (A) a default under the Credit Agreement and (B) an event of default under the Credit Agreement, subject to a cure period, solely in the case of clause (i) of the preceding sentence, until May 15, 2024 (for the avoidance of doubt, failure to perform clause (ii) of the preceding sentence would constitute an immediate event of default under the Credit Agreement without any cure or grace period).

In addition, the Fourth Amendment provides that if we have not, after the Effective Date and on or before September 30, 2024, received at least $40,000,000 in gross proceeds from the issuance of our common stock, warrants and/or pre-funded warrants, and/or cash and/or non-cash consideration (measured at fair market value, as determined by the Administrative Agent in its sole discretion) from partnering transactions entered into after the Effective Date, the “Minimum Liquidity Amount” (as defined in the Credit Agreement) that we are required to maintain at all times will increase to $25,000,000 from $15,000,000, unless and until we have received, after the Effective Date and on or before November 30, 2024, at least $50,000,000 in gross proceeds from the issuance of our common stock, warrants and/or pre-funded warrants, and/or in cash and/or non-cash consideration (measured at fair market value, as determined by the Administrative Agent in its sole discretion) from partnering transactions entered into after the Effective Date.

In connection with the Fourth Amendment, on the Effective Date, we granted new warrants to the Lenders to purchase up to 100,000 shares of our common stock (the “2024 Warrant Shares”) at an exercise price of $3.0723 per share (the “2024 Warrants”), which represents a 10% premium over the arithmetic average of the volume-weighted average price of our common stock on the Nasdaq Capital Market during the 30 trading days preceding the Effective Date.

The 2024 Warrants will expire on April 19, 2029 and may be net exercised at the holder’s election.

The 2024 Warrants were issued, and the 2024 Warrant Shares will be issued (if at all), in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), contained in Section 4(a)(2) of the Securities Act.

The Lenders have represented that they are acquiring the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, and appropriate legends have been or will be affixed to the securities.

On the Effective Date, we amended and restated our Amended and Restated Registration Rights Agreement (the “Second Amended and Restated Registration Rights Agreement”) with the Lenders, originally dated April 19, 2022.

Pursuant to the Second Amended and Restated Registration Rights Agreement, we agreed to register the 2024 Warrant Shares for resale.

The foregoing summary of the Fourth Amendment, the 2024 Warrants and the Second Amended and Restated Registration Rights Agreement are qualified in their entirety by the complete text of such agreements, copies of which are filed hereto as Exhibit 10.22.4, 4.5 and 4.6, respectively.

(b) On December 14, 2023 , Vimal Mehta , Chief Executive Officer , adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 34,938 shares of the Company’s common stock to cover taxes due in connection with the vesting of restricted stock units until December 31, 2024.

On December 14, 2023 , Richard Steinhart , Chief Executive Officer , adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 25,000 shares of the Company’s common stock to cover taxes due in connection with the vesting of restricted stock units until December 31, 2024.

On December 14, 2023 , Javier Rodriguez , Senior Vice President, Chief Legal Officer , adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 25,000 shares of the Company’s common stock to cover taxes due in connection with the vesting of restricted stock units until December 31, 2024.

On December 14, 2023 , Matthew Wiley , Chief Commercial Officer , adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 25,000 shares of the Company’s common stock to cover taxes due in connection with the vesting of restricted stock units until December 31, 2024.

On December 14, 2023 , Frank Yocca , Chief Scientific Officer , adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 25,000 shares of the Company’s common stock to cover taxes due in connection with the vesting of restricted stock units until December 31, 2024.

Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

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INFORMATION ABOUT OUR DIRECTORS & EXECUTIVE OFFICERS

The following information with respect to our Board of Directors (the "Board") and executive officers is presented as of March 15, 2023:

The following information with respect to our Board of Directors (the "Board") and executive officers is presented as of March 22, 2024:

Position at BioXcel

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Vincent O’Neill, M.D.

Senior Vice President and Chief Medical Officer

Executive Vice President, Chief of Product Development and Medical Officer

Javier Rodriguez

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Commercial at Jazz Pharmaceuticals, Inc., a pharmaceutical company

Krishnan Nandabalan, Ph.D.

President and Chief Executive Officer, InveniAI, a company focus on AI applications for drug discovery and development

Michael Votruba, M.D.

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Specimen Stock Certificate evidencing the shares of common stock

Form of Warrant Agreement under the Credit Agreement and Guaranty, by and among BioXcel Therapeutic, Inc., Oaktree Fund Administration, LLC, the Subsidiary Guarantors from time to time party thereto and the Lenders from time to time party thereto, dated April 9, 2022

Registration Rights Agreement, dated April 19, 2022, among the Company and Oaktree-TCDRS Strategic Credit, LLC, Oaktree-Forrest Multi-Strategy, LLC, Oaktree-TBMR Strategic Credit Fund C, LLC, Oaktree-TBMR Strategic Credit Fund F, LLC, Oaktree-TBMR Strategic Credit Fund G, LLC, Oaktree-TSE 16 Strategic Credit, LLC, INPRS Strategic Credit Holdings, LLC, Oaktree Strategic Income II, Inc., Oaktree Specialty Lending Corporation, Oaktree Strategic Credit Fund, Oaktree GCP Fund Delaware Holdings, L.P., Oaktree Diversified Income Fund Inc., Oaktree AZ Strategic Lending Fund, L.P., Oaktree Loan Acquisition Fund, L.P., Oaktree LSL Fund Delaware Holdings EURRC, L.P., and Q Boost Holding LLC

Form of Amended and Restated Warrant Agreement, dated December 5, 2023

Form of Warrant Agreement, dated December 5, 2023

Form of Warrant Agreement, dated March 20, 2024

Second Amended and Restated Registration Rights Agreement, between the Company and the parties thereto, dated March 20, 2024.

Second Amended and Restated Separation and Shared Services Agreement, dated March 6, 2020 , by and between BioXcel Corporation and BioXcel Therapeutics, Inc.

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Second Amendment to Second Amended and Restated Separation and Shared Services Agreement, dated March 3, 2021, by and between BioXcel LLC and BioXcel Therapeutics Inc.

Amended and Restated Asset Contribution Agreement, effective November 7, 2017,

by and between BioXcel LLC and BioXcel Therapeutics, Inc.

Amended and Restated Asset Contribution Agreement, effective November 7, 2017, by and between BioXcel LLC and BioXcel Therapeutics, Inc.

Lease Agreement, dated as of August 20, 2018, by and between Fusco Harbour Associates, LLC, as Landlord, and BioXcel Therapeutics, Inc., as Tenant

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Employment Agreement between Matthew Wiley and BioXcel Therapeutics, Inc., dated January 12, 2022.

Employment Agreement BioXcel Therapeutics, Inc.

and Vincent O’Neill, M.D.

dated July 1, 2022

Non-Employee Director Compensation Program

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Credit Agreement and Guaranty, by and among BioXcel Therapeutic, Inc., Oaktree Fund Administration, LLC, the Subsidiary Guarantors from time to time party thereto and the Lenders from time to time party thereto, dated April 19, 2022

Revenue Interest Financing Agreement, between BioXcel Therapeutics, Inc., Oaktree Fund Administration, LLC and the Purchasers from time to time party thereto, dated April 19, 2022

Waiver and First Amendment to Credit Agreement and Guaranty, by and between the Company, the lenders party thereto and Oaktree Fund Administration LLC dated November 13, 2023.

Second Amendment to Credit Agreement and Guaranty and Termination of Revenue Interest Financing Agreement dated December 5, 2023, to the Credit Agreement and Guaranty, dated April 19, 2022, by and among the Company, as the borrower, certain subsidiaries of the Company from time to time party thereto as subsidiary guarantors, the lenders party thereto, and Oaktree Fund Administration LLC, as administrative agent (as amended)

Third Amendment to Credit Agreement and Guaranty dated February 12, 2024, to the Credit Agreement and Guaranty, dated April 19, 2022, by and among the Company, as the borrower, certain subsidiaries of the Company from time to time party thereto as subsidiary guarantors, the lenders party thereto, and Oaktree Fund Administration LLC, as administrative agent (as amended)

Fourth Amendment to Credit Agreement and Guaranty, dated March 20, 2024, to the Credit Agreement and Guaranty, dated April 19, 2022, by and among the Company, as the borrower, certain subsidiaries of the Company from time to time party thereto as subsidiary guarantors, the lenders party thereto, and Oaktree Fund Administration LLC, as administrative agent (as amended)

Commercial Supply Agreement, between ARx, LLC and BioXcel Therapeutics, Inc., dated April 1, 2022

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Form of Profits Interest Award Agreement under the Management Incentive Plan

Form of RSU Agreement pursuant to the OnkosXcel Therapeutics, LLC and OnkosXcel Employee Holdings, LLC Management Incentive Plan.

Non-Compete Agreement, by and among the Company, Dr.

Krishnan Nandabalan, InveniAI LLC, Invea Therapeutics, Inc.

and the other parties thereto, dated September 19, 2023.

Subsidiaries of BioXcel Therapeutics, Inc.

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Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Inline eXtensible Business Reporting Language (XBRL) Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

Policy for Recovery of Erroneously Awarded Compensation

Inline eXtensible Business Reporting Language (XBRL) Instance Document – the instance document does not appear in the Interactive Data File because its XBRL

tags are embedded within the Inline XBRL document

Inline XBRL Taxonomy Extension Schema Document

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March 22, 2024

/s/ Krishnan Nandabalan

Krishnan Nandabalan, Ph.D.

March 15, 2023

/s/ Michal Votruba

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We have audited the accompanying consolidated balance sheets of BioXcel Therapeutics, Inc.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in stockholders' (deficit) equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in conformity with U.S.

generally accepted accounting principles.

The Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations, has used significant cash in operations and has stated that substantial doubt exists about the Company’s ability to continue as a going concern.

Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the Audit Committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgment.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosure to which it relates.

As of December 31, 2023, research and development expenses and accrued research and development expenses includes clinical trial expenses and related accrued clinical trial expenses.

Description of the Matter

How We Addressed the Matter in Our Audit

Clinical trial expense and related accrued clinical trial expenses

As discussed in Note 3 to the consolidated financial statements, at the end of the reporting period, the Company estimates the progress toward completion of the research or development objectives, and depending on the amount and timing of payments to the service providers may record net prepaid or accrued expense for associated research and development costs.

As of December 31, 2023, research and development expenses and accrued research and development expenses includes clinical trial expenses and related accrued clinical trial expenses.

Auditing the Company’s clinical trial expenses and related accrued clinical trial expenses was complex because the evidence is accumulated from multiple third-party service providers and in certain circumstances, the nature and amount of services that have been rendered during the reporting period does not correspond to the timing and pattern of vendor invoicing.

To test the clinical trial expenses and accrued clinical trial expenses, our audit procedures included, among others, evaluating the significant assumptions used by management to estimate the clinical trial expenses and testing the accuracy and completeness of the underlying data.

To test the significant assumptions, we inspected the Company's contracts with third-party service providers, corroborated the progress of clinical trials and other research and development projects with the Company’s internal personnel that oversee these activities, and obtained information directly from third-party service providers which included the third parties’ estimates of clinical trial costs incurred to date.

We also examined invoices received from vendors and cash disbursements made to third-party service providers subsequent to December 31, 2023 to assess the completeness of the recorded accruals.

/s/ Ernst & Young LLP

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Operating lease right-of-use assets

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current liabilities

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Commitments and contingencies (Note 18)

Stockholders' equity

Stockholders' (deficit) equity

Preferred stock, $ 0.001 par value, 10,000 shares authorized;

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Accumulated deficit

Total stockholders' equity

Total liabilities and stockholders' equity

Total stockholders' (deficit) equity

Total liabilities and stockholders' (deficit) equity

The accompanying notes are an integral part of these consolidated financial statements.

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Selling, general and administrative

Restructuring costs

Total operating expenses

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Interest income

Other expense, net

Other (income) expense, net

Basic and diluted net loss per share attributable to common stockholders

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BIOXCEL THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY

(amounts in thousands)

Balance as of January 1, 2022

Issuance of common shares, net of issuance costs of $ 3,542

Issuance of stock purchase warrants

Stock-based compensation

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Balance as of December 31, 2022

Issuance of stock purchase warrants

Issuance of common stock, net of offering costs

Stock-based compensation

Exercise of stock options

Repricing of stock purchase warrants

Issuance of stock purchase warrants

Vesting of restricted stock units, net of employee tax obligations

Balance as of December 31, 2023

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Loss on disposal of equipment

Operating lease right-of-use assets

Changes in operating assets and liabilities

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Prepaid expenses, other current assets and other assets

Operating lease right-of-use assets

Accounts payable, accrued expenses, and other current liabilities

Accounts payable, accrued expenses, due to related parties, and other current liabilities

Accrued interest

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INVESTING CASH FLOW ACTIVITIES:

Purchases of property and equipment

Purchases of equipment and leasehold improvements

Net cash used in investing activities

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Debt issuance costs

Proceeds from issuance of common stock, net of issuance costs

Proceeds from issuance of common stock

Offering costs for common stock issuance

Payment of employee tax obligations related to vesting restricted stock units

Exercise of stock options

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of the period

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Issuance of stock purchase warrants

Repricing of stock purchase warrants

Interest paid

Purchases of property and equipment in accounts payable and accrued expenses

Conversion of accrued interest to long-term debt

The accompanying notes are an integral part of these consolidated financial statements.

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“OnkosXcel” refers to BTI’s wholly owned subsidiary for its advanced immuno-oncology assets, OnkosXcel Therapeutics, LLC.

On April 6, 2022, BTI announced that the United States (“U.S.”) Food and Drug Administration (“FDA”) approved IGALMI (dexmedetomidine or “Dex”) sublingual film for the acute treatment of agitation associated with schizophrenia or bipolar I or II disorder in adults.

IGALMI is approved to be self-administrated by patients under the supervision of a health care provider.

The Company deployed the first phase of its sales team for high priority targets in May 2022.

Furthermore, on July 6, 2022, BTI announced that IGALMI, was commercially available in doses of 120 and 180 microgram through the Company’s third-party logistics provider and was available for order through wholesalers.

The Company’s most advanced clinical development program is BXCL501, an investigational proprietary, orally dissolving, film formulation of Dex for the treatment of agitation associated with psychiatric and neurological disorders.

BTI continues to conduct clinical trials evaluating BXCL501 for the acute treatment of agitation in Alzheimer’s disease patients, and for adjunctive treatment of patients with Major Depressive Disorder (“MDD”).

The Company is also planning clinical trials for the at-home use of BXCL501 for agitation associated with bipolar disorders and schizophrenia.

On April 6, 2022, BTI announced that the United States (“U.S.”) Food and Drug Administration (“FDA”) approved IGALMI TM (dexmedetomidine or “Dex”) sublingual film for the acute treatment of agitation associated with schizophrenia or bipolar I or II disorder in adults.

IGALMI TM is approved to be self-administrated by patients under the supervision of a health care provider.

On July 6, 2022, BTI announced that IGALMI TM , was commercially available in doses of 120 and 180 micrograms.

The Company’s most advanced clinical development program is BXCL501.

In indications other than those approved by the FDA as IGALMI TM , BXCL501 is an investigational proprietary, orally dissolving, film formulation of Dex for the treatment of agitation associated with psychiatric and neurological disorders.

The Company’s advanced immuno-oncology asset, BXCL701, is an investigational, orally administered systemic innate immune activator for the treatment of a rare form of prostate cancer and advanced solid tumors that are refractory or treatment naïve to checkpoint inhibitors.

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The Company’s principal office is in New Haven, Connecticut.

Impact of COVID-19 Pandemic

The COVID-19 pandemic and responsive measures have significantly impacted, both directly and indirectly, businesses and commerce.

The Company continues to work closely with clinical sites to monitor the potential impact of the evolving COVID-19 pandemic and the spread of its variants.

To date, BTI has not experienced any significant delays in any of its ongoing or planned clinical trials, except for occasional COVID-19 related disruptions, such as to its TRANQUILITY II trial.

However, this could change rapidly.

Basis of Presentation

The accompanying consolidated financial statements include those of the Company and its subsidiaries after elimination of all intercompany accounts and transactions and have been prepared in conformity with United States (“U.S.”) Generally Accepted Accounting Principles (“GAAP”).

The Company believes that its existing cash and cash equivalents will be sufficient to cover its cash flow requirements for at least the next twelve months from the issuance of these financial statements.

However, the Company’s future requirements may change and will depend on numerous factors.

The accompanying consolidated financial statements include the accounts for the Company and all entities where BTI has a controlling financial interest after elimination of all intercompany accounts and transactions and have been prepared in conformity with U.S.

As of December 31, 2023, the Company had cash and cash equivalents of $ 65,221 and an accumulated deficit of $ 590,598 .

BTI has incurred substantial net losses and negative cash flows from operating activities in nearly every fiscal period since inception and expects this trend to continue for the foreseeable future.

The Company recognized net losses of $ 179,053 and $ 165,757 for the years ended December 31, 2023 and 2022, respectively, and had net cash used in operating activities of $ 155,006 and $ 135,341 for the years ended December 31, 2023 and 2022, respectively.

Management is required at each reporting period to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

The Company’s history of significant losses, its negative cash flows from operations, potential near-term increased covenant-driven amortization payments under its Credit Agreement, its limited liquidity resources currently on hand, and its dependence on its ability to obtain additional financing to fund its operations after the current resources are exhausted, about which there can be no certainty, have resulted in management’s assessment that there is substantial doubt about the Company’s ability to continue as a going concern for a period of at least 12 months from the issuance date of the financial statements included in this Annual Report on Form 10-K.

This going concern evaluation takes into consideration the potential mitigating effect of management’s Reprioritization (as defined in Note 4, Restructuring).

When substantial doubt exists, management evaluates whether the mitigating effect of its plans sufficiently alleviates the substantial doubt about the Company’s ability to continue as a going concern.

The mitigating effect of management’s plans, however, is only considered if both (i) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued and (ii) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

Generally, to be considered probable of being effectively implemented, the plans need to be approved by the Company’s Board of Directors.

The Company’s Reprioritization was approved by the Board of Directors on August 8, 2023;

however, such plans will not mitigate the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments that may result from the outcome of this uncertainty.

The going concern analysis does not consider possible future amendments to or restructuring of the Credit Agreement (as defined in Note 9, Debt and Credit Facilities) or other potential sources of debt or equity capital.

Successful completion of the Company’s development programs and, ultimately, the attainment of profitable operations are dependent upon future events, including obtaining adequate financing to support the Company’s cost structure and operating plan.

Management’s plans to improve the Company’s liquidity and reduce its operating expenses and capital requirements include, among other things, pursuing one or more of the following steps to raise additional capital, none of which can be guaranteed or are entirely within the Company’s control:

• raise funding through the sale of the Company’s equity securities;

• raise funding through third-party investments in or other strategic options for OnkosXcel;

• raise funding through debt financing and/or restructuring of its existing OFA Facilities;

• establish collaborations with potential partners to advance the Company’s product pipeline;

• establish collaborations with potential marketing partners;

• reduce overhead and headcount to focus on core priorities;

• any combination of the foregoing.

If the Company is unable to raise capital when needed or on acceptable terms, or if it is unable to procure collaboration arrangements to advance its programs, the Company would be forced to discontinue some of its operations or develop and implement a plan, beyond its Reprioritization initiatives, to further extend payables, reduce overhead, scale back or cease some or all of its revised operating plan until sufficient additional capital is raised to support further operations.

Summary of Significant Accounting Policies

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Accounts Receivable, Net

Accounts receivable arise from sales of IGALMI and represent amounts due from distributors.

Accounts receivable arise from sales of IGALMI TM and represent amounts due from distributors.

Payment terms generally range from 30 to 75 days from the date of the sale transaction, and accordingly, do not involve a significant financing component.

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Concentrations of Credit Risk

The Company sells IGALMI through a drop-ship program under which orders from hospitals and similar health care institutions are processed through wholesalers, but shipments of the product are sent directly to the individual hospitals and similar health care institutions.

The Company sells IGALMI TM through a drop-ship program under which orders from hospitals and similar health care institutions are processed through wholesalers, but shipments of the product are sent directly to the individual hospitals and similar health care institutions.

BTI also contracts directly with intermediaries such as group purchasing organizations (“GPOs”).

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If actual market conditions are less favorable than projected, write-downs of inventory may be required.

Deferred Initial Public Offering Costs

Deferred initial public offering costs of $ 2,570 , consisted of legal, accounting, and other costs that were directly related to the Company’s proposed initial public offering of OnkosXcel.

These costs were charged to the Consolidated Statements of Operations during the year ended December 31, 2023 as the initial public offering was delayed for an extended period of time.

The costs were recorded as Selling, general and administrative expenses.

Property and Equipment

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Detachable warrants are evaluated for classification as either equity instruments, derivative liabilities, or liabilities depending on the specific terms of the warrant agreement.

In circumstances in which debt is issued with equity-classified warrants, the proceeds from the issuance of debt are first allocated to the debt and the warrants at their estimated fair values.

In circumstances in which debt is issued with equity-classified warrants, the proceeds from the issuance of debt are first allocated to the debt and then the warrants at their estimated fair values.

The portion of the proceeds allocated to the warrants are accounted for as paid-in capital and a debt discount.

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Derivative Assets and Liabilities

Derivative assets and liabilities are recorded on the Company`s Consolidated Balance Sheets at their fair value on the date of issuance and are revalued on each balance sheet date until such instruments are settled or expire, with changes in the fair value between reporting periods recorded as other income or expense within other expense, net in the Consolidated Statements of Operations.

Derivative assets and liabilities are recorded on the Company`s Consolidated Balance Sheets at their fair value on the date of issuance and are revalued on each balance sheet date until such instruments are settled or expire, with changes in the fair value between reporting periods recorded as other income or expense within Other (income) expense, net in the Consolidated Statements of Operations.

The Company does not use derivative instruments for speculative purposes or to hedge exposures to cash-flow or market risks.

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Revenue Recognition

The Company’s revenues consist of product sales of IGALMI.

The Company’s revenues consist of product sales of IGALMI TM .

BTI recognizes revenue when its customers obtain control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services.

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The Company’s estimate of the transaction price for each contract includes all variable consideration to which the Company expects to be entitled.

BTI distributes IGALMI in the U.S.

BTI distributes IGALMI TM in the U.S.

through arrangements with a distributor, wholesalers, and GPOs.

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The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur.

The Company’s only performance obligation identified for IGALMI is to deliver the quantity of product ordered to the location specified by the customer’s order.

The Company’s only performance obligation identified for IGALMI TM is to deliver the quantity of product ordered to the location specified by the customer’s order.

The Company records shipping and handling costs associated with delivery of product to its customers within Selling, general and administrative expenses on its Consolidated Statements of Operations.

Under the Company’s current product sales arrangements, BTI does not have contract assets (unbilled receivables), as it generally invoices its customer at the time of revenue recognition, and contract liabilities, as the Company generally does not receive prepayments from its customers prior to product delivery.

BTI sells IGALMI at wholesale acquisition cost and calculates product revenue net of variable consideration and consideration payable to third parties associated with distribution of product.

Under the Company’s current product sales arrangements, BTI does not have contract assets (unbilled receivables), as it generally invoices its customer at the time of revenue recognition.

BTI sells IGALMI TM at wholesale acquisition cost and calculates product revenue net of variable consideration and consideration payable to third parties associated with distribution of product.

The Company records reserves, based on contractual terms, for the following components of consideration related to product sold during the reporting period.

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Government Rebates

IGALMI is eligible for purchase by, or qualifies for reimbursement from, Medicaid and other U.S.

IGALMI TM is eligible for purchase by, or qualifies for reimbursement from, Medicaid and other U.S.

government programs that are eligible for rebates on the price they pay for the product.

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BTI classifies all fees paid to the distributor, other than those discussed above and those related to warehouse operations, as Selling, general and administrative expenses on its Consolidated Statements of Operations.

Fees paid to the distributor for warehouse operations are classified as costs of goods sold on BTI’s Consolidated Statements of Operations.

Fees paid to the distributor for warehouse operations are classified as Cost of goods sold on BTI’s Consolidated Statements of Operations.

Cost of Goods Sold

Cost of goods sold includes the cost of producing and distributing inventories that are related to product revenues during the respective period.

Cost of goods sold may also include costs related to excess or obsolete inventory adjustment charges, as well as costs related to warehouse operations paid to distributors.

Cost of goods sold also includes costs related to excess or obsolete inventory adjustment charges, as well as costs related to warehouse operations paid to distributors.

Stock-Based Compensation

The Company measures and recognizes stock-based compensation expense based on estimated fair value for all share-based awards made to employees, non-employee service providers, and directors, including stock options, BTI restricted stock units (“BTI RSUs”), OnkosXcel profit sharing units (“PSUs”), OnkosXcel restricted stock units (“OnkosXcel RSUs”) and BTI performance stock units (“Performance Units”).

The Company’s 2017 Equity Incentive Plan (the “2017 Plan”) became effective in August 2017.

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The Company’s stock-based awards are valued at fair value on the date of grant and that fair value is recognized as an expense in the Consolidated Statements of Operations over the requisite service period using the accelerated attribution method.

The estimated fair value of stock-based awards was determined using the Black-Scholes pricing model on the date of grant.

The estimated value of the BTI RSUs and Performance Units is based on the Company’s closing stock price on the grant date.

The estimated fair value of stock-options, OnkosXcel RSUs and PSUs was determined using the Black-Scholes pricing model on the date of grant.

For awards subject to performance-based vesting conditions, the Company recognizes stock-based compensation expense when the achievement of the performance condition becomes probable.

The Black-Scholes pricing model is affected by the Company’s stock price, as well as assumptions regarding variables including, but not limited to, the strike price of the instrument, the risk-free rate, the expected stock price volatility over the term of the awards, and expected term of the award.

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Research and development expenses include wages, benefits, non-cash stock-based compensation, facilities, supplies, external services, clinical study, manufacturing costs related to clinical trials and other expenses that are directly related to the Company’s research and development activities.

At the end of the reporting period, the Company compares payments made to third-party service providers to the estimated progress toward completion of the research or development objectives.

Depending on the timing of payments to the service providers and the progress that the Company estimates has been made for the program as a result of the level of service provided, the Company may record net prepaid or accrued expense relating to these costs.

At the end of the reporting period, the Company estimates the progress toward completion of the research or development objectives and, depending on the amount and timing of payments to the service providers may record net prepaid or accrued expense for associated research and development costs.

Such estimates are subject to change as additional information becomes available.

The Company expenses research and development costs as incurred.

The majority of our service providers invoice us monthly in arrears for services performed.

We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time.

We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary.

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period.

Costs related to filing and pursuing patent applications are recorded in selling, general and administrative expenses and are expensed as incurred since recoverability of such expenditures is uncertain.

Most of the Company’s service providers invoice BTI monthly in arrears for services performed.

The Company estimates its accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to management at that time.

BTI management periodically confirms the accuracy of the Company’s estimates with the service providers and makes adjustments if necessary.

Although management does not expect its estimates to be materially different from amounts actually incurred, management’s understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in BTI reporting amounts that are too high or too low in any particular period.

Costs related to filing and pursuing patent applications are recorded in Selling, general and administrative expenses in the Consolidated Statements of Operations and are expensed as incurred since recoverability of such expenditures is uncertain.

Fair Value of Financial Instruments

The Company measures certain financial assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances, or unobservable inputs.

The Company applies a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources, or observable inputs, and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances, or unobservable inputs.

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

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The Company operates in a single segment.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making

decisions regarding resource allocation and assessing performance.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions regarding resource allocation and assessing performance.

To date, the Company’s chief operating decision maker has made such decisions and assessed performance at the Company level as one segment.

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Recently adopted accounting pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU No.

2019-12”), which amends the existing guidance relating to the accounting for income taxes.

2019-12 is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of accounting for income taxes and to improve the consistent application of U.S.

GAAP for other areas of accounting for income taxes by clarifying and amending existing guidance.

2019-12 was effective for interim and annual periods beginning after December 15, 2020.

The adoption of ASU No.

2019-12 on January 1, 2021 did not have a material impact on the Company’s consolidated financial statements.

Accounting Pronouncements effective in future periods

In June 2016, the FASB issued ASU No.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

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2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) - Effective Dates, which deferred the effective dates of Topic 326 for the Company, until fiscal year 2023.

The Company does not expect the adoption of Topic 326 to have a material impact on its consolidated financial statements .

The Company adopted Topic 326 in 2023 and it did not have a material impact on its consolidated financial statements.

Accounting Pronouncements effective in future periods

In November 2023, the FASB issued ASU 2023-07, Segment reporting, which requires disclosure of incremental segment information on an annual and interim basis.

The standard is effective for years beginning after December 15, 2023, and interim periods beginning after December 15, 2024 and early adoption is permitted.

The Company is currently evaluating the effect of adopting this guidance on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to income tax disclosures, which requires disclosure of disaggregated income taxes paid by jurisdiction, enhances disclosures in the effective tax rate reconciliation and modifies other income tax-related disclosures.

The amendments are effective for annual periods beginning after December 15, 2024.

The Company is currently evaluating the effect of adopting this guidance on its consolidated financial statements.

Restructuring

On August 8, 2023, the Company’s Board of Directors approved a broad-based strategic reprioritization (the “Reprioritization”).

The Company took actions to reduce certain operational and workforce expenses that were no longer deemed core to ongoing operations in order to extend its cash runway and drive innovation and growth in high potential clinical development and value creating opportunities.

These actions included a shift in commercial strategy for IGALMI TM in the institutional setting, a reduction of in-hospital commercialization expenses, a suspension of programs no longer determined to be core to ongoing operations, and a prioritization of at-home treatment setting opportunities for BXCL501.

As part of this strategy, the Company’s Board of Directors approved a reduction of approximately 60 % of the Company’s workforce.

The Company notified impacted employees on August 14, 2023 and recorded total restructuring costs of $ 4,163 for the year ended December 31, 2023.

These costs consisted of severance and benefit costs of $ 4,063 and contract termination costs of $ 100 .

The Company paid $ 3,998 of severance and benefit costs and $ 100 of contract termination costs in the year ended December 31, 2023.

The Reprioritization is substantially complete as of December 31, 2023, and any remaining costs are expected to be paid during the first quarter of 2024.

Inventory consists of the following:

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Total inventory

There were no write-downs of inventory for the year ended December 31, 2022.

The Company did not have commercial inventory as of December 31, 2021 .

The Company recorded inventory write-downs of $ 1,191 for the year ended December 31, 2023.

No write-downs of inventory were recorded for the year ended December 31, 2022 .

Property and Equipment, net

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Leasehold improvements

Construction-in-process

Total property and equipment

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Accrued expenses consist of the following:

December 31, 2022

December 31, 2021

Accrued research and development expenses

Accrued compensation and benefits

Accrued professional expenses

Accrued professional fees

Accrued taxes

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Transactions with BioXcel LLC

The Company entered into a Separation and Shared Services Agreement with BioXcel LLC that took effect on June 30, 2017, as amended and restated thereafter (the “Services Agreement”), pursuant to which services provided by BioXcel LLC, through its subsidiaries in India and the U.S., will continue indefinitely, as agreed upon by the parties.

These services are primarily for drug discovery, CMC and administrative support.

The Company entered into a Separation and Shared Services Agreement with BioXcel LLC that took effect on June 30, 2017, as amended and restated thereafter (the “Services Agreement”), pursuant to which BioXcel LLC has agreed to provide the Company with certain intellectual property prosecution and management and research and development activities.

Under the Services Agreement, we have an option, exercisable until December 31, 2024, to enter into a separate collaborative services agreement with BioXcel LLC pursuant to which BioXcel LLC shall perform product identification and related services for us utilizing its EvolverAI.

We agreed to pay BioXcel LLC $ 18 per month from March 13, 2023, to December 31, 2024 in exchange for this option.

We agreed to negotiate any such collaborative services agreement in

good faith and to incorporate reasonable market-based terms, including consideration for BioXcel LLC reflecting a low, single-digit royalty on net sales and reasonable development and commercialization milestone payments, provided that (i) development milestone payments shall not exceed $ 10,000 in the aggregate and not be payable prior to proof of concept in humans and (ii) commercialization milestone payments shall be based on reaching annual net sales levels, be limited to 3 % of the applicable net sales level, and not exceed $ 30,000 in the aggregate.

Service charges recorded under the Services Agreement for the years December 31, 2023 and 2022 were as follows:

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December 31, 2023

Revenue Interest Financing Agreement ("RIFA")

December 31, 2022

Revenue Interest Financing Agreement ("RIFA")

RIFA accrued interest

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Credit Agreement and Guaranty

Payable-in-kind interest on Credit Agreement and Guaranty

Payable-in-kind ("PIK") interest

Total long-term debt liability

Unamortized debt discounts and issuance costs

Unamortized debt premiums, discounts and issuance costs

Total long-term debt

On April 19, 2022 (the “Effective Date”), the Company entered into two strategic financing agreements:

On April 19, 2022, the Company entered into two strategic financing agreements:

(i) a Credit Agreement and Guaranty (the “Credit Agreement”) by and among the Company, as the borrower, certain subsidiaries of the Company from time to time party thereto as subsidiary guarantors, the lenders party thereto (the “Lenders”), and Oaktree Fund Administration LLC (“OFA”) as administrative agent, and (ii) a Revenue Interest Financing Agreement (the “RIFA”;

and together with the Credit Agreement, the “OFA Facilities”) by and among the Company, the purchasers party thereto (the “Purchasers”) and OFA as administrative agent.

Under the OFA Facilities, the Lenders and the Purchasers agreed to, in the aggregate between the two OFA Facilities, provide up to $ 260,000 in gross funding to support the Company’s commercial activities of IGALMI sublingual film.

In addition, the OFA Facilities are intended to support the expansion of clinical development efforts of BXCL501, which includes a Phase 3 program for the acute treatment of agitation in patients with Alzheimer’s disease, and for general corporate purposes.

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and Qatar Investment Authority.

A summary of the OFA Facilities is provided below.

Credit Agreement

The Credit Agreement provides up to $ 135,000 in senior secured term loans, of which the initial Tranche A of $ 70,000 was funded on April 28, 2022, and the remaining tranches may be borrowed at the Company’s option prior to December 31, 2024, subject to satisfaction of certain conditions, including regulatory and financial milestones.

Tranche B of the Credit Agreement is $ 35,000 and is available upon satisfaction of certain conditions, including receipt of certain regulatory and financial milestones.

Tranche C of the Credit Agreement is $ 30,000 and is available upon satisfaction of

certain conditions, including specified minimum net sales of the Company attributable to sales of BXCL501 for a trailing twelve consecutive month period.

As of December 31, 2022, $ 65,000 remained available under the Credit Agreement, subject to achievement of the specified conditions and milestones.

The loans under the Credit Agreement do not amortize and mature on the fifth anniversary of the Effective Date;

provided that the Company may, at its option, extend the maturity date to the sixth anniversary if, prior to December 31, 2024, the Company receives and satisfies certain conditions including receipt of certain regulatory and financial milestones.

Borrowings under the Credit Agreement are issued at a 200 -basis point original issue discount and bear interest at a fixed annual rate of 10.25 %, payable quarterly.

Of such interest, 225 -basis points per annum is, at the Company’s option, payable in kind by capitalizing and adding such interest to the outstanding principal amount of loans from the first payment date on which such interest is owed through, and including, the third anniversary of such payment date, unless, with respect to any payment date, the Company elects to pay all or a portion of such interest in cash.

The Company is required to pay a ticking fee equal to 0.75 % per annum on the undrawn amount of the commitments, payable quarterly commencing 120 days after the funding of the Tranche A term loan through the termination of the commitments, which is expensed as incurred and recognized as interest expense in the Consolidated Statements of Operations.

Waiver and First Amendment to Credit Agreement and Guaranty

On November 13, 2023, the Company, the lenders party to the Credit Agreement and OFA entered into a Waiver and First Amendment to Credit Agreement and Guaranty (the “First Amendment”) that provided for (i) a waiver and a modification to the covenant in the Credit Agreement regarding investments in OnkosXcel and (ii) an agreement among

the parties to further revise key financial terms in the Credit Agreement and terminate the RIFA.

Pursuant to the First Amendment, the Lenders agreed to permit the Company to invest up to a maximum of $ 30,000 at any time outstanding in OnkosXcel, increased from $ 25,000 at any time outstanding.

The First Amendment also waived any defaults or events of default arising under the Credit Agreement due to a breach prior to the date of the First Amendment of the OnkosXcel investment covenant, or a breach of the Company’s obligation to notify OFA of such default.

In connection with the First Amendment, the Company paid the Lenders a fee of $ 180 (representing 0.25 % of the loans outstanding under the Credit Agreement on the date of the First Amendment) and agreed to pay to the Lenders an exit fee equal to 0.25 % of the loans under the Credit Agreement repaid upon maturity or prepayment of the loans.

Second Amendment to Credit Agreement and Guaranty and Termination of the RIFA

On December 5, 2023, (the “Second Amendment Effective Date”), the Company entered into the Second Amendment to Credit Agreement and Guaranty and Termination of Revenue Interest Financing Agreement (the “Second Amendment”), which further amended the Credit Agreement.

On the Second Amendment Effective Date, the Credit Agreement was amended to provide up to $ 202,319 in senior secured term loans, including the initial Tranche A of $ 70,000 , which was funded on April 28, 2022, and related capitalized interest on Tranche A through the Second Amendment Effective Date in the amount of $ 72,319 .

In addition, the $ 30,000 in financing previously provided to the Company under the RIFA on July 8, 2022 was converted to a term loan under the Credit Agreement (the “Tranche A-2 Term Loan”).

The RIFA and all commitments for potential future funding thereunder were terminated.

In addition, pursuant to the Second Amendment, the Lenders agreed to permit the Company to invest up to a maximum of $ 30,865 at any time outstanding in OnkosXcel, increased from $ 30,000 .

In connection with the Second Amendment, the Company agreed to pay to the Lenders an exit fee equal to 0.25 % of the loans under the Credit Agreement repaid upon maturity or prepayment of the loans (which exit fee is in addition to, and not in lieu of, the exit fee provided for by the First Amendment).

As of December 31, 2023, $ 100,000 in commitments under the Credit Agreement remains unfunded, and Oaktree has an Equity Investment Right (as defined below) to purchase up to $ 5,000 of Common Stock from the Company.

The blended effective interest rate on the Tranches A-1 and A-2 as of December 31, 2023 was approximately 13.5 %.

The remaining tranches may be borrowed at the Company’s option prior to December 31, 2024, subject to satisfaction of certain conditions, including regulatory and financial milestones.

Tranche B of the Credit Agreement is $ 20,000 and is available upon satisfaction of certain conditions and financial milestones.

Tranche C of the Credit Agreement is $ 30,000 and is available upon satisfaction of certain conditions, including receipt of certain regulatory and financial milestones.

Tranche D of the Credit Agreement is $ 50,000 and is available upon satisfaction of the Tranche C Term Loans conditions precedent to, and the funding of Tranche C Loans, including specified minimum net sales of the Company attributable to sales of BXCL501 for a trailing twelve consecutive month period, on or before December 31, 2025.

The loans under the Credit Agreement do not amortize and mature on April 19, 2027.

The Company may, at its option, no earlier than September 21, 2026 and no later than October 21, 2026, request an extension of the maturity date to April, 19, 2028, provided that the Company satisfies certain conditions including receipt of certain regulatory and financial milestones.

Borrowings under the Credit Agreement are issued at a 200 -basis point original issue discount and bear interest at a variable annual rate of TERM SOFR (but not less than 2.5 % or more than 5.5 %) plus 7.5 %, payable quarterly.

The rate resets every three months based on the current Term SOFR rate.

Of such interest, above 8 % per annum is, at the Company’s option, payable in kind by capitalizing and adding such interest to the outstanding principal amount of loans from the first payment date on which such interest is owed through March 31, 2025, unless, with respect to any payment date, the Company elects to pay all or a portion of such interest in cash.

The Company is required to pay a ticking fee equal to 0.75 % per annum on the undrawn amount of the commitments, payable quarterly commencing 120 days after April 22, 2022 through the termination of the commitments, which is expensed as incurred and recognized as interest expense in the Consolidated Statements of Operations.

The Company may voluntarily prepay the Credit Agreement at any time subject to a prepayment fee.

The Company’s obligations under the Credit Agreement are guaranteed by BTI’s existing and subsequently acquired or organized subsidiaries, subject to certain exceptions.

BTI’s obligations under the Credit Agreement and the related guarantees thereunder are secured, subject to customary permitted liens and other agreed upon exceptions, by (i) a pledge of all of the equity interests of all of the Company’s existing and any future direct subsidiaries, and (ii) a perfected security interest in all of its and the guarantors’ tangible and intangible assets (except that the guarantees provided by the BXCL701 Subsidiaries (as defined below) are unsecured).

BTI’s obligations under the Credit Agreement and the related guarantees thereunder are secured, subject to customary permitted liens and other agreed upon exceptions, by (i)

a pledge of all of the equity interests of all of the Company’s existing and any future direct subsidiaries, and (ii) a perfected security interest in all of its and the guarantors’ tangible and intangible assets (except that the guarantees provided by the BXCL701 Subsidiaries (as defined below) are unsecured).

The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness, and dividends and other distributions, subject to certain exceptions, including specific exceptions with respect to product commercialization and development activities.

The Company must also comply with certain financial covenants, including (i) maintenance of cash or permitted cash equivalent investments in accounts controlled by OFA for the Lenders, of at least (a) $ 15,000 from the Effective Date until the date on which the second tranche of loans are funded (the “Step-Up Date”) and (b) $ 20,000 from and after the Step-Up Date, provided, in the case of (a) and (b), that following any Permitted BXCL701 Release Event (as defined below), such amount will increase by $ 12,500 , and following such time as unaffiliated third parties hold ownership of at least 30 % of the equity interests in the BXCL701 Subsidiaries (as defined below), such amount will increase by an additional $ 5,000 (provided, that such amount will in no event exceed 50 % of the aggregate amount of loans outstanding at any time);

The Company must also comply with certain financial covenants, including (i) maintenance of cash or permitted cash equivalent investments in accounts controlled by OFA for the Lenders, of at least (a) initially, $ 15,000 , (b) from and after the funding of the Tranche B loans, $ 20,000 , and (c) from and after the Company’s satisfaction of the funding conditions for the Tranche C loans, $ 15,000 , provided, that the liquidity covenant applicable at any time will be increased upon certain events related to a sale of OnkosXcel (up to a maximum amount equal to $ 37,500 ), provided that the minimum liquidity amount will in no event exceed 50 % of the aggregate amount of loans outstanding under the Credit Agreement at any time;

and (ii) a minimum revenue test, measured quarterly beginning with the Company’s fiscal quarter ending on December 31, 2024 (such six-month period the “Revenue Covenant Measurement Period”), that requires it and its subsidiaries’ consolidated net revenue for the six consecutive month period ending on the last day of each such fiscal quarter to not be less than a minimum revenue amount specified in the Credit Agreement (such testing date, the “Revenue Covenant Measurement Testing Date” and the covenant described in this clause (ii) the “Revenue Covenant”).

The Company’s failure to comply with the financial covenants will result in an event of default, subject to certain cure rights with respect to the Revenue Covenant.

With respect to the Revenue Covenant, the Company would be required to pay the Lenders an amount in respect of the Revenue Covenant, and any such payment will be applied to the prepayment of the loans under the Credit Agreement.

If, as of a Revenue Covenant Measurement Testing Date, the Company’s revenue for the applicable Revenue Covenant Measurement Period is less than the minimum revenue amount specified for the applicable period then required under the Revenue Covenant, the Company would have a right to cure such shortfall for a total of three fiscal periods by making a revenue cure payment (which would be treated as prepayments of the loans subject to a prepayment fee) to the Lenders in an amount equal to the difference between such minimum required revenue amount and the Company’s actual revenues for such Revenue Covenant Measurement Period, such payment to not be less than $1,000.

If paid, the Company will be deemed to have complied with the Revenue Covenant as of such Revenue Covenant Measurement Testing Date.

Any such payment will be applied to the prepayment of the loans under the Credit Agreement.

Notwithstanding the foregoing, the Credit Agreement permits OnkosXcel (together with OnkosXcel Employee Holdings, LLC (“Employee Holdings”), a subsidiary of BTI, and their respective subsidiaries, the “BXCL701 Subsidiaries”) to receive third-party investment or transfer all or substantially all of their assets to an unaffiliated third party, in each case subject to terms and conditions set forth in the Credit Agreement, including the escrow of certain proceeds received by BTI and its subsidiaries (other than the BXCL701 Subsidiaries) in respect of these disposition events and, under circumstances set forth in the Credit Agreement, the mandatory prepayment of such escrowed amounts.

The Company’s equity interests in the BXCL701 Subsidiaries have been pledged in support of its obligations under the Credit Agreement, and the BXCL701 Subsidiaries have provided direct guarantees of BTI’s obligations under the Credit Agreement on an unsecured basis.

However, the pledge, guarantee and other obligations of the BXCL701 Subsidiaries under the Credit Agreement will be released upon certain agreed upon events (“Permitted BXCL701

Release Events”), including an initial public offering by the BXCL701 Subsidiaries or the ownership by unaffiliated third parties of at least 20 % of the equity interests in the BXCL701 Subsidiaries.

However, the pledge, guarantee and other obligations of the BXCL701 Subsidiaries under the Credit Agreement will be released upon certain agreed upon events (“Permitted BXCL701 Release Events”), including an initial public offering by the BXCL701 Subsidiaries or the ownership by unaffiliated third parties of at least 20 % of the equity interests in the BXCL701 Subsidiaries.

The Credit Agreement contains events of default that are customary for financings of this type relating to, among other things, payment defaults, breach of covenants, breach of representations and warranties, cross default to material indebtedness, bankruptcy-related defaults, judgment defaults, breach of the financial covenants described above, and the occurrence of certain change of control events.

In certain circumstances, events of default are subject to customary cure periods.

The Credit Agreement also contains certain regulatory-related events of default, which do not have cure periods.

Following an event of default and any applicable cure period, the Lenders will have the right upon notice to terminate any undrawn commitments and may accelerate all amounts outstanding under the Credit Agreement, in addition to other remedies available to them as the Company’s secured creditors.

Revenue Interest Financing Agreement

The RIFA provides up to $ 120,000 in financing in exchange for a capped revenue interest on net sales of IGALMI, and other future BXCL501 products, if any, that receive regulatory approval for sale.

The initial Tranche A of $ 30,000 was funded on July 8, 2022, and the remaining tranches may be borrowed at the Company’s option prior to December 31, 2024, subject to satisfaction of certain conditions, including certain regulatory, patent, and financial milestones.

As noted, the RIFA was terminated when the Company entered into the Second Amendment, which amended the Credit Agreement (as amended by the First Amendment).

The $ 30,000 Tranche A previously provided to the Company under the RIFA was converted to the Tranche A-2 Term Loan.

Prior to termination, the RIFA provided up to $ 120,000 in potential financing in exchange for a capped revenue interest on net sales of IGALMI TM , and other future BXCL501 products, if any, that received regulatory approval for sale.

The initial Tranche A of $ 30,000 was funded on July 8, 2022.

The effective interest rate on the RIFA as of December 31, 2022, was approximately 14 %.

Under the terms of the RIFA, the Purchasers will receive tiered revenue interest payments on U.S.

Under the terms of the RIFA, the Purchasers were to receive tiered revenue interest payments on U.S.

net sales of IGALMI™, and other future BXCL501 products, if any, that receive regulatory approval for sale, equal to a royalty ranging from 0.375 % to 7.750 % of net sales of IGALMI™, and other future BXCL501 products, if any, approved for sale in the U.S., subject to a hard cap equal to 1.75 x the total amount funded.

In addition, if the conditions to the second tranche of the financing provided under the RIFA have been met, once payments equal to the hard cap have been received by the Purchasers, the Company will be required to make revenue interest payments equal to a flat 0.375 % royalty on U.S.

net sales of IGALMI, and other future BXCL501 products, if any, that receive regulatory approval for sale, through and including March 31, 2036 (the “Tail Royalty”).

The Company is also required to make certain additional payments to the Purchasers from time to time to ensure that the aggregate amount of payments received by the Purchasers under the RIFA are at least equal to certain agreed upon minimum levels as of certain specified dates, subject to terms and conditions set forth in the RIFA.

Revenue interest payments due under the RIFA are payable quarterly based on net sales.

Any time after the initial funding of the RIFA, BTI has the right (the “BTI Call Option”), but not the obligation, to buy out the Purchasers’ interests in the revenue interest payments at an agreed upon repurchase price.

The BTI Call Option can be exercised in year one, two, three and thereafter at a multiple of the Purchasers invested capital of 1.225 x, 1.375 x, 1.525 x and 2.25 x, respectively.

The Purchasers will not be entitled to any Tail Royalty if the BTI Call Option is exercised before the third anniversary of the Effective Date.

The Company’s obligations under the RIFA are secured, subject to customary permitted liens and other agreed upon exceptions and subject to an intercreditor agreement between OFA for the Credit Agreement and RIFA, by a perfected security interest in (i) accounts receivable arising from net sales of BXCL501 products in the U.S.

and one or more segregated bank accounts maintained for the purpose of receiving payments in respect of such accounts receivable, (ii) intellectual property that is claiming or covering BXCL501 itself or any method of using, making or manufacturing BXCL501 and (iii) regulatory approvals, clinical data, and all other assets that underlie BXCL501.

The RIFA contains customary representations and warranties and certain restrictions on the Company’s ability to incur indebtedness and grant liens on intellectual property related to BXCL501.

In addition, the RIFA provides that if certain events occur, including certain bankruptcy events, failure to make payments, a change of control, an out-license or sale of all of the rights in and to BXCL501 in the U.S., in each case except a permitted licensing transaction (as defined in the RIFA) and, subject to applicable cure periods, material breach of the covenants in the RIFA, OFA, at the direction of the Purchasers, may require the Company to repurchase the Purchasers’ interests in the revenue interest payments at an agreed upon repurchase price.

Tranche B and C of the RIFA are each $ 45,000 and are available upon satisfaction of certain conditions, including receipt of certain regulatory and patent related milestones and specified minimum net sales of BXCL501 during any

consecutive twelve-month period.

As of December 31, 2022, $ 90,000 remained available under the RIFA, subject to achievement of the specified conditions and milestones.

The Company would also have been required to make certain additional payments to the Purchasers from time to time to ensure that the aggregate amount of payments received by the Purchasers under the RIFA were at least equal to certain agreed upon minimum levels as of certain specified dates, subject to terms and conditions set forth in the RIFA.

Revenue interest payments due under the RIFA were payable quarterly based on net sales.

Warrants and Equity Investment Right

In connection with the Credit Agreement, on the Effective Date, the Company granted warrants to the Lenders to purchase up to 278 shares of its common stock (the “BTI Warrants”) at an exercise price of $ 20.04 per share.

The BTI Warrants will expire on April 19, 2029, are freely transferable and may be net exercised at the holder’s election.

In addition, pursuant to the Credit Agreement, the Lenders have the right to purchase shares of the Company’s common stock after the Effective Date, so long as borrowings under the Credit Agreement are outstanding, for a purchase price of $ 5,000 at a price per share equal to a 10 % premium to the volume-weighted average price of the common stock over the 30 trading days prior to the Lenders’ election to proceed with such equity investment (the “Equity Investment Right”).

BTI entered into a registration rights agreement with the Lenders and filed a registration statement on Form S-3 to register the shares issuable upon exercise of the BTI Warrants and, if issued, the shares related to the Equity Investment Right, for resale.

The maximum shares of BTI common stock issuable under the BTI Warrants and Lenders’ Equity Investment Right is 5,593 .

In connection with the closing of the Second Amendment, on the Second Amendment Effective Date, the Company amended and restated the warrants granted to the Lenders on April 19, 2022 to purchase up to 278 shares of the Company’s common stock at an exercise price of $ 20.04 per share (the “Original Warrants”).

Pursuant to the amendment and restatement of the Original Warrants, dated December 5, 2023 (the “Amended and Restated Original Warrants”), the exercise price of the Original Warrants has been reduced to $ 3.6452 per share.

In addition, the Company granted new warrants to the Lenders to purchase up to 70 shares of the Company’s common stock (the “2023 Warrant Shares”) at an exercise price of $ 3.6452 per share (the “2023 Warrants” and together with the Amended and Restated Original Warrants, the “Warrants”).

The Amended and Restated Original Warrants and the 2023 Warrants will expire on April 19, 2029 and may be net exercised at the holder’s election.

In addition, pursuant to the Credit Agreement, the Lenders have the right to purchase shares of the Company’s common stock after the Second Amendment Effective Date, so long as borrowings under the Credit Agreement are outstanding, for a purchase price of $ 5,000 at a price per share equal to a 10 % premium to the volume-weighted average price of the common stock over the 30 trading days prior to the Lenders’ election to proceed with such equity investment (the “Equity Investment Right”).

BTI entered into a registration rights agreement (the “Registration Rights Agreement”) with the Lenders and filed a registration statement on Form S-3 to register the shares issuable upon exercise of the Warrants and, if issued, the shares related to the Equity Investment Right, for resale.

The maximum shares of BTI common stock issuable under the Warrants (including the Original Warrants and the 2023 Warrants) and Lenders’ Equity Investment Right was 5,852 as of December 31, 2023.

On the Second Amendment Effective Date, Company amended and restated its Registration Rights Agreement (the “Amended and Restated Registration Rights Agreement”) with the Lenders, dated April 19, 2022, pursuant to which the Company agreed to register the 2023 Warrant Shares for resale.

As part of the Credit Agreement, OnkosXcel, a wholly owned subsidiary of BTI, granted warrants to the Lenders to purchase 175 individual limited liability company units (which number of units is not in thousands;

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Therefore, these instruments are recorded as Derivative liabilities in the Consolidated Balance Sheets.

The respective derivative liabilities are recorded at fair value on the date of issuance and are revalued on each balance sheet date until such instruments are settled or expire, with changes in the fair value between reporting periods recorded within other expense, net in the Company’s Consolidated Statements of Operations.

The respective derivative liabilities are recorded at fair value on the date of issuance and are revalued on each balance sheet date until such instruments are settled or expire, with changes in the fair value between reporting periods recorded within Other (income) expense, net in the Company’s Consolidated Statements of Operations.

Common Stock Financing Activities

In June 2021, the Company sold, in a registered offering, 3,155 shares of its common stock at a public offering price of $ 31.70 per share.

The Company received proceeds of $ 96,937 , net of issuance costs of $ 3,042 .

In May 2021, the Company entered into an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC (“Jefferies”) pursuant to which the Company could offer and sell shares of its common stock, having an aggregate offering price of up to $ 100,000 , from time to time, through an “at the market offering” program under which Jefferies will act as sale agent.

The Company sold 124 shares under the Sale Agreement in June 2021.

As of December 31, 2021, the Company received proceeds of $ 4,056 , net of issuance costs of $ 500 .

In May 2021, the Company entered into an Open Market Sale Agreement (as amended, supplemented and/or restated from time to time, the “Sale Agreement”) with Jefferies LLC (“Jefferies”) pursuant to which the Company could offer and sell shares of its common stock, having an aggregate offering price of up to $ 100,000 , from time to time, through an “at the market offering” program under which Jefferies will act as sale agent.

In November 2023, the Company amended the Sale Agreement to increase the size of the “at the market offering" program to $ 150,000 .

The Company sold 1,408 shares under the Sale Agreement in the year ended December 31, 2023 for net proceeds of $ 26,221 .

For the year ended December 2023, the Company sold shares for the gross amount of $ 27,032 , and incurred issuance costs of $ 811 .

The Company did not sell any shares, and thus did no t receive any proceeds under this program, for the year ended December 31, 2022 .

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The vesting schedule of all awards granted under the 2020 Plan is determined by the Board of Directors, which is generally four years .

Stock-based awards granted under the 2020 Plan include stock options, BTI RSUs, and Performance Units.

As of December 31, 2023, there were 664 shares available to be granted under the 2020 Plan.

Restricted stock units

The table below summarizes activity relating to RSUs.

BTI Restricted stock units

The table below summarizes activity relating to BTI RSUs.

Outstanding as of January 1, 2023

Outstanding as of December 31, 2023

In 2022, the Company granted 122 time-based RSUs to certain employees and consultants.

The majority of RSUs granted to employees vest over four years , with 25 % vesting at the one-year anniversary of the grant date and the balance vesting ratably over the remaining 12 quarters of the vesting period.

25 RSUs granted to employees in May 2022 cliff-vest 100 % at the one-year anniversary of the grant date.

RSUs granted to a third-party consultant vest 50 % on each of the first and second anniversaries of the grant date.

None of the RSUs had vested as of December 31, 2022.

The weighted average grant date fair value per share for the RSUs granted in March and May 2022 was $ 15.31 and $ 10.76 , respectively.

In 2023, the Company granted 133 time-based BTI RSUs to certain employees.

All of the BTI RSUs vest over four years , with 25 % vesting at the one-year anniversary of the grant date and the balance vesting ratably over the remaining 12 quarters of the vesting period.

The weighted average grant date fair value per share for the BTI RSUs was $ 19.62 .

Unrecognized stock-based compensation expense related to these awards was $ 1,417 as of December 31, 2023.

No RSUs were issued and outstanding as of December 31, 2021.

Profit sharing units

The table below summarizes activity relating to profits interests (the “profit sharing units” or “PSUs”).

In 2022, the Company granted 122 ( 119 , net of forfeitures) time-based BTI RSUs to certain employees and consultants.

The majority of BTI RSUs granted to employees vest over four years , with 25 % vesting at the one-year anniversary of the grant date and the balance vesting ratably over the remaining 12 quarters of the vesting period.

There were 25 BTI RSUs granted to the employees in May 2022 which fully vested at the one-year anniversary of the grant date.

BTI RSUs granted to a third-party consultant vest 50 % each on the first and second anniversaries of the grant date.

The weighted average grant date fair value per share for the BTI RSUs granted in 2022 was $ 14.38 .

Unrecognized stock-based compensation expense related to these awards was $ 298 as of December 31, 2023.

BTI Performance stock units

The table below summarizes activity relating to Performance Units related to BTI common stock.

Outstanding as of January 1, 2023

Outstanding as of December 31, 2023

In October 2023, the Company granted 543 Performance Units to employees.

209 Performance Units vest on the one-year anniversary of the grant date, and the remaining 334 Performance Units are performance based and vest on the one-year anniversary of the grant date, provided certain performance criteria are met.

The weighted average value of Performance Units granted and cancelled during 2023 was $ 2.43 .

None of the Performance Units had vested as of December 31, 2023.

Unrecognized stock-based compensation expense related to the awards expected to vest was $ 515 as of December 31, 2023.

OnkosXcel Profit sharing units

The table below summarizes activity relating to the PSUs associated with OnkosXcel as described below.

Weighted average

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Vested units as of December 31, 2023

During 2022, Employee Holdings, a management holding company used to facilitate the grant of equity interests to service providers of OnkosXcel, granted 1,310 individual (not in thousands) time-based PSUs in Employee Holdings to certain employees and consultants of the Company in consideration for services provided to OnkosXcel.

During 2023, Employee Holdings, a management holding company used to facilitate the grant of equity interests to service providers of OnkosXcel granted 30 individual (not in thousands) time-based PSUs related to OnkosXcel to certain employees of the Company in consideration for services provided to OnkosXcel.

In 2022, Employee Holdings granted 1,310 (not in thousands) PSUs to employees and a consultant of the Company for services provided to OnkosXcel.

The PSUs represent indirect equity interests in OnkosXcel.

All PSUs, other than those granted to certain executive employees of the Company, vest ratably over 48 months .

PSUs granted to certain executive employees of the Company, vest ratably over 24 months .

The fair value of $ 4 per unit for the PSUs was estimated at the date of grant using a Black-Scholes option pricing model.

Profit share unit valuation inputs

All PSUs, other than those granted to certain

executive employees of the Company, vest ratably over 48 months .

PSUs granted to certain executive employees of the Company, vested ratably over 24 months .

The fair values of the PSUs granted in 2023 and 2022 were $ 8 per unit and $ 4 per unit, respectively, and were estimated at the date of grant using a Black-Scholes option pricing model.

The total fair value of the PSUs vested during the year ended December 31, 2023 was $ 1,942 .

2023 grant profit share unit valuation inputs

Expected volatility

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Expected term

Unrecognized stock-based compensation expense related to the PSUs was $ 4,588 as of December 31, 2022.

No PSUs were issued and outstanding as of December 31, 2021.

Stock options

Unrecognized stock-based compensation expense related to the PSUs was $ 971 and $ 4,588 as of December 31, 2023 and 2022, respectively.

OnkosXcel restricted stock units

The table below summarizes activity relating to the OnkosXcel RSUs.

Outstanding as of January 1, 2023

Outstanding as of December 31, 2023

During the year ended December 31, 2023, the Company granted 225 individual (not in thousands) OnkosXcel RSUs to certain employees.

125 of the OnkosXcel RSUs vest upon the earlier to occur of (a) 180 days after an initial public offering of OnkosXcel, or (b) a change in control of OnkosXcel.

The remaining OnkosXcel RSUs vest over four years , with 25 % vesting at the one-year anniversary of the grant date and the balance vesting ratably over the remaining 12 quarters of the vesting period.

The weighted average grant date fair value per unit for the OnkosXcel RSUs was approximately $ 10 .

Unrecognized stock-based compensation expense related to the awards expected to vest was approximately $ 552 as of December 31, 2023.

BTI Stock options

A summary of the Company’s stock option activity for the year ended December 31, 2023, is presented below.

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The weighted average remaining contractual life was 6.4 years for options outstanding as of December 31, 2023.

Unrecognized compensation expense related to unvested stock option awards as of December 31, 2023, was $ 9,478 and will be recognized over the remaining vesting periods of the underlying awards.

The weighted-average period over which such compensation is expected to be recognized is 1.1 years.

Stock-Based Compensation

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Expected dividend yield

In 2021, the Company began using a combination of the historical volatility of publicly traded peer companies and the limited historical information related to the Company’s common stock to estimate volatility.

In 2023, the Company began using the historical volatility of its common stock to estimate volatility.

Prior to 2023, volatility was estimated using a combination of the historical volatility of publicly traded peer companies and that of the Company’s common stock.

The expected term of the awards is estimated based on the simplified method, which calculates the expected term based upon the midpoint of the term of the award and the vesting period.

The Company uses the simplified method because it does not have sufficient option exercise data to provide a reasonable basis upon which to estimate the expected term.

The expected dividend yield is zero percent as the Company has no history of paying dividends nor does management expect to pay dividends over the contractual terms of these options.

The expected dividend yield is zero percent as the Company has no history of

paying dividends nor does management expect to pay dividends over the contractual terms of these options.

The risk-free interest rates are determined by reference to the U.S.

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The fair value of the underlying common stock is generally determined as the closing price of the Company’s common stock on The Nasdaq Capital Market on the grant date, with consideration of whether there is material nonpublic information that could impact that estimated fair value when it is released.

The Company recognized stock-based compensation expense related to awards issued under the 2017 Plan and the 2020 Plan, as well as the PSUs, of $ 17,337 and $ 19,455 for the years ended December 31, 2022 and 2021, respectively, which were comprised as follows:

The Company recognized stock-based compensation expense related to awards issued under the 2017 Plan and the 2020 Plan, as well as the OnkosXcel PSUs and OnkosXcel RSU’s, of $ 18,614 and $ 17,337 for the years ended December 31, 2023 and 2022, respectively, which were comprised as follows:

Year ended December 31,

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Selling, general and administrative

Unrecognized compensation expense related to unvested stock option awards as of December 31, 2022, was $ 15,483 and will be recognized over the remaining vesting periods of the underlying awards.

The weighted-average period over which such compensation is expected to be recognized is 1.6 years.

2020 Employee Stock Purchase Plan

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federal tax treatment under Section 423 of the Internal Revenue Code (the “Section 423 Component”) shall not exceed 500 shares.

The purchase price will be determined by the administrator of the ESPP and, for purposes of the Section 423 Component, shall not be less than 85 % of the fair value

of a share on the first trading day or on the last trading day of the applicable offering period, whichever is lower.

The purchase price will be determined by the administrator of the ESPP and, for purposes of the Section 423 Component, shall not be less than 85 % of the fair value of a share on the first trading day or on the last trading day of the applicable offering period, whichever is lower.

The shares available for issuance under the ESPP increased by 281 shares and 280 shares on January 1, 2023 and 2022, respectively.

To date, no shares have been sold under the ESPP.

There were 905 shares available for issuance as of December 31, 2023.

BTI leases office space for its corporate headquarters at 555 Long Wharf Drive, New Haven, Connecticut (the “HQ Lease”) under an operating lease that expires in February 2026.

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Total lease payments

Less imputed interest

Imputed interest

Total lease liability

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Participating employees receive an employer matching contribution equal to 50 % of eligible employee contributions on the first 5 % of eligible compensation contributed.

During the year ended December 31, 2022, employer contributions to the 401(K) Plan were $ 568 .

BTI did not offer a matching contribution to the 401(K) Plan prior to 2022.

Employer contributions to the 401(K) Plan were $ 788 and $ 568 for the years ended December 31, 2023 and 2022, respectively.

Fair Value Measurements

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Refer to Note 3, Summary of Significant Accounting Policies, for additional information on the accounting policies related to fair value.

The carrying amounts of cash and accounts payable approximate fair value due to the short-term nature of these instruments.

The carrying amounts of Cash and cash equivalents, Accounts receivable, net and Accounts payable approximate fair value due to the short-term nature of these instruments.

As of December 31, 2023 and 2022, the Company had $ 64,860 and $ 191,022 , respectively, primarily in money market funds that hold U.S.

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Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category.

Derivative liabilities

Balance - December 31, 2021

Addition of derivative liabilities

Derivative liabilities, Balance - January 1

Change in fair value

Balance - December 31, 2022

The change from the day one fair value of the derivative liabilities was reported in the Consolidated Balance Sheets as derivative liabilities and Consolidated Statements of Operations as other expense, net, as of and for the year ended December 31, 2022.

Derivative liabilities, Balance - December 31

The derivative liabilities were reported at their fair values in the Consolidated Balance Sheets.

The changes in the fair value of the derivative liabilities were reported in the Consolidated Statements of Operations as Other (income) expense, net, for the years ended December 31, 2023 and 2022.

Inputs used to calculate the estimated fair value of the Equity Investment Right were as follows:

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In estimating the fair value of the derivative liability related to the OnkosXcel Warrants, inputs included third-party fair value estimates of OnkosXcel limited liability company units along with the volatility of those units (which was set at 100 % based on the historical volatility of the Company’s stock, along with a peer group of comparable publicly traded companies), and the timing and probability of the relevant capital transactions occurring.

The estimated fair value of the Credit Agreement and RIFA as of December 31, 2022, were $ 52,670 and $ 30,673 , respectively.

The estimated fair value of the Credit Agreement as of December 31, 2023, was $ 88,210 .

Both observable and unobservable inputs were used to determine the fair value of long-term debt, which was classified within the Level 3 category.

The fair value of the BTI warrants, which is a non-recurring fair value, was determined as of the date of issuance using a Black-Scholes pricing model and the fair value of $ 3,245 was recorded as a component of stockholders’ equity in additional-paid-in-capital in the Consolidated Balance Sheets, with the offset recorded as a discount on the amounts funded under the OFA Facilities.

This non-recurring measurement is classified as a Level 3.

The fair value of the 2023 Warrants, which is a non-recurring fair value, was determined as of the date of issuance using a Black-Scholes pricing model and the fair value of $ 200 was recorded as a component of stockholders’ equity in Additional-paid-in-capital in the Consolidated Balance Sheets, with the offset recorded as a discount on the amounts funded under the Credit Agreement.

This non-recurring measurement is classified as Level 3.

The inputs used were a strike price of $ 3.6452 , the Company’s stock price of $ 3.71 , volatility of 99 %, term of 5.4 years and risk-free rate of 4.14 %.

The fair value of the Original Warrants, which was a non-recurring fair value, was determined as of the date of issuance using a Black-Scholes pricing model and the fair value of $ 3,245 was recorded as a component of stockholders’ equity in Additional-paid-in-capital in the Consolidated Balance Sheets, with the offset recorded as a discount on the amounts funded under the OFA Facilities.

This non-recurring measurement is classified as Level 3.

The inputs used were a strike price of $ 20.04 , the Company’s stock price of $ 14.93 , volatility of 95 %, term of 7 years and risk-free rate of 2.95 %.

As discussed in Note 9, Debt and Credit Facilities, in connection with the closing of the Second Amendment of the Credit Agreement, on the Second Amendment Effective Date, the Company amended and restated the Original Warrants granted to the Lenders to have an exercise price of $ 3.6452 per share.

Using a Black-Scholes pricing model, the Company determined that the Amended and Restated Original Warrants’ fair values at the original strike price of $ 20.04 and the amended strike price of $ 3.6452 were $ 548 and $ 802 , respectively, as of the Second Amendment Effective Date.

The Amended and Restated Original Warrants’ incremental increase in fair value for the repricing of $ 254 , was recorded as a component of stockholders’ equity in Additional-paid-in-capital in the Consolidated Balance Sheets, with the offset recorded as a discount on the amounts refinanced under the Credit Agreement.

There is no provision for income taxes because the Company has historically incurred operating losses and maintains a full valuation allowance against its net deferred tax assets.

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Deferred tax liabilities:

Unrealized gain

Right-of-use assets

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The utilization of such NOL carryforwards and realization of tax benefits in future years depends predominantly upon having taxable income.

The Company also has approximately $ 10,013 of federal orphan drug and research development credits which will begin to expire in 2037 if not utilized.

The Company has approximately $ 14,345 of federal orphan drug and research development credits which will begin to expire in 2037 if not utilized.

The Company also has approximately $ 1,206 of state drug research development credits which will begin to expire in 2040 if not utilized.

Utilization of the NOL and research tax credit carryforwards may be subject to a substantial annual limitation due to ownership limitations that have occurred or that could occur in the future, as required by section 382 of the U.S.

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These ownership changes may limit the amount of the NOL and research credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively.

In general, an "ownership change,"

as defined by Section 382 of the U.S.

In general, an "ownership change," as defined by Section 382 of the U.S.

Tax Code, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock by certain stockholders or public groups.

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Basic and diluted net loss per share

Potentially dilutive securities outstanding consists of stock options and RSUs.

Potentially dilutive securities outstanding consists of stock options, RSUs and performance units, and BTI warrants.

The Company had common stock equivalents outstanding as of December 31, 2023 and 2022 of 6,036 and 5,280 shares, respectively.

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From time to time, in the ordinary course of business, the Company may be subject to litigation and regulatory examinations as well as information gathering requests, inquiries and/or investigations.

The Company is not currently subject to any matters where it believes there is a reasonable possibility that a material loss may be incurred.

As of December 31, 2022, there were no matters which would have a material impact on the Company’s financial results.

Other than the below, the Company is not currently subject to any matters where it believes there is a reasonable possibility that a material loss may be incurred.

On July 7, 2023, plaintiff Katelyn Martin filed a class action complaint against the Company and certain executives in the United States District Court for the District of Connecticut, captioned Martin v.

BioXcel Therapeutics, et al., 3:23-cv-00915 (D.

On October 4, 2023, pursuant to the Private Securities Litigation Reform Act, the court appointed two co-Lead Plaintiffs.

The co-Lead Plaintiffs filed an amended complaint on December 5, 2023, alleging violations of Sections 10(b) and 20A of the Securities and Exchange Act of 1934 (the “Exchange Act”) and SEC Rule 10b-5 promulgated thereunder.

The amended complaint alleges that defendants made false or misleading statements regarding the TRANQUILITY II trial and the development of BXCL501 for an expanded indication related to the treatment of certain Alzheimer’s-related agitation.

Defendants filed a motion to dismiss on February 6, 2024, which has not been decided.

On November 28, 2023, Plaintiffs Pratheesan Panancherry and Jeffrey Bastress filed a stockholder derivative complaint in the United States District Court for the District of Connecticut purportedly on behalf of the Company and against Vimal Mehta, Richard I.

Steinhart, Peter Mueller, June Bray, Sandeep Laumas, Michael Miller, Michal Votruba, and Krishnan Nandabalan as Defendants, and the Company as Nominal Defendant under the caption Panancherry et al v.

Mehta et al, 3:23-cv-1554.

Following the initial action, Plaintiffs Maria Vomvolakis (3:24-cv-3) and Kelly Fowler (3:24-cv-203) each filed separate stockholder derivative complaints in the District of Connecticut raising similar claims as Panancherry and Bastress, including business torts and violations of the Securities Exchange Act of 1934.

The cases have been consolidated under the caption In re BioXcel Therapeutics, Inc.

Stockholder Derivative Litigation, 3:23-cv-1554 (D.

The above-captioned consolidated action is currently stayed.

On January 11, 2024, Plaintiff Jeremy Smith filed a stockholder derivative complaint in the United States District Court for the District of Delaware purportedly on behalf of the Company and against Vimal Mehta, Peter Mueller, June Bray, Sandeep Laumas, Michael Miller, Michal Votruba, Richard I.

Steinhart, Robert Risinger, and Krishnan Nandabalan as Defendants, and the Company as Nominal Defendant under the caption Smith v.

Mehta et al, 1:24-cv-00041.

Following the initial action, Plaintiff Janice Korff filed a stockholder derivative complaint in the District of Delaware raising similar claims as Smith (1:24-cv-130), including business torts and violations of the Securities Exchange Act of 1934.

The cases have been consolidated under the caption In re BioXcel Therapeutics, Inc.

Derivative Litigation, 1:24-cv-00041 (D.

The Company expects to seek a stay in the above-captioned consolidated action.

At this time, the Company does not believe the claims in the above-captioned matters have merit, and intends to vigorously defend against them;

however, the potential costs and liabilities associated with this litigation are uncertain.

In April 2022, the Company signed a commercial supply agreement that requires minimum annual payments for the first three years of the agreement that in aggregate total $ 10,000 for the three-year period .

Subsequent Events

As of March 15, 2023, the Company sold 756 shares under the Sale Agreement with Jefferies in the first quarter of 2023 for net proceeds of $ 23,917 , net of issuance costs of $ 740 .

On February 12, 2024, the Company entered into the Third Amendment to Credit Agreement and Guaranty (the “Third Amendment”), which amended the Credit Agreement.

Pursuant to the Third Amendment, the Lenders agreed to waive the covenant that the Company shall not receive a report and opinion from the Company’s independent auditors that contains a “going concern” or like qualification or exception or emphasis of matter of going concern footnote with respect to the Company’s financial statements for the fiscal year ended December 31, 2023 and, as a result, such event shall not be an event of default.

As a condition to the effectiveness of the Third Amendment, among other things, the Company shall have received at least $ 40,000 in gross proceeds from a registered public sale of the Company’s common stock, warrants and/or pre-funded warrants on or before February 20, 2024.

The Company did not meet this condition and therefore the Third Amendment did not become effective.

On March 20, 2024 (the “Effective Date”), the Company entered into a Fourth Amendment (the “Fourth Amendment”) to the Credit Agreement and Guaranty (as amended from time to time, the “Credit Agreement”) by and among the Company, as the borrower, certain subsidiaries of the Company from time to time party thereto as subsidiary guarantors, the Lenders, and OFA as administrative agent, pursuant to which the Lenders waived the covenant that the Company not receive a report and opinion from the Company’s independent registered public accounting firm that contains a “going concern” or similar qualification with respect to the Company’s financial statements for the year ended December 31, 2023.

Accordingly, while the Company’s independent registered public accounting firm’s report contained in this Annual Report on Form 10-K contains a “going concern” explanatory paragraph, it does not constitute an event of default under the Credit Agreement.

The Fourth Amendment includes a covenant that the Company will receive, (i) after the Effective Date and on or before April 15, 2024, at least $ 25,000 in gross proceeds from the issuance of its common stock, warrants and/or pre-funded warrants, and/or in non-refundable cash consideration from partnering transactions entered into after the Effective Date (so long as such partnering transactions would not require the Company or any of its subsidiaries to make any cash investments in connection with the partnering transactions and no such cash investments are made) and (ii) after the Effective Date and on or before November 30, 2024, at least $ 50,000 (for the avoidance of doubt, inclusive of amounts previously counted toward the preceding clause (i)) in gross proceeds from the issuance of its common stock, warrants and/or pre-funded warrants, and/or in cash and/or non-cash consideration (measured at fair market value, as determined by the Administrative Agent (as defined in the Credit Agreement) in its sole discretion ) from partnering transactions entered into after the Effective Date.

For the avoidance of doubt, failure to perform clause (ii) of the preceding sentence would constitute an immediate event of default under the Credit Agreement without any cure or grace period.

In addition, the Fourth Amendment provides that if the Company has not, after the Effective Date and on or before September 30, 2024, received at least $ 40,000 in gross proceeds from the issuance of its common stock, warrants and/or pre-funded warrants, and/or cash and/or non-cash consideration (measured at fair market value, as determined by the Administrative Agent in its sole discretion) from partnering transactions entered into after the Effective Date, the “Minimum Liquidity Amount” (as defined in the Credit Agreement) that the Company is required to maintain at all times will increase to $ 25,000 from $ 15,000 , unless and until we have received, after the Effective Date and on or before November 30, 2024, at least $ 50,000 in gross proceeds from the issuance of the Company’s common stock, warrants and/or pre-funded warrants, and/or in cash and/or non-cash consideration (measured at fair market value, as determined by the Administrative Agent in its sole discretion) from partnering transactions entered into after the Effective Date.

In connection with the Fourth Amendment, on the Effective Date, the Company granted new warrants to the Lenders to purchase up to 100 shares of its common stock (the “2024 Warrant Shares”) at an exercise price of $ 3.0723 per share (the “2024 Warrants”), which represents a 10 % premium over the arithmetic average of the volume-weighted average price of the Company’s common stock on the Nasdaq Capital Market during the 30 trading days preceding the Effective Date.

The 2024 Warrants will expire on April 19, 2029 and may be net exercised at the holder’s election.

On the Effective Date, the Company amended and restated its Amended and Restated Registration Rights Agreement (the “Second Amended and Restated Registration Rights Agreement”) with the Lenders, originally dated April 19, 2022.

Pursuant to the Second Amended and Restated Registration Rights Agreement, the Company agreed to register the 2024 Warrant Shares for resale.

As discussed in Note 11, Common Stock Financings Activities, the Company has previously entered into an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC (“Jefferies”), as amended, pursuant to which the Company could offer and sell shares of its common stock, having an aggregate offering price of up to $ 150,000 , from time to time, through an “at the market offering” program under which Jefferies will act as sale agent.

From January 1, 2024 through March 19, 2024, the Company sold 647 shares under the Sale Agreement for gross proceeds of $ 1,743 and received proceeds of $ 1,691 , net of issuance costs of $ 52 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures