Investments, at Fair Value

9 Months Ended

Sep. 30, 2024

Investments, at Fair Value [Abstract]

INVESTMENTS, AT FAIR VALUE

NOTE 4 - INVESTMENTS, AT FAIR VALUE:

2023 Scilex Transaction

On September 21, 2023, the Company entered into and consummated the transactions (collectively, the “2023 Scilex Transaction”) contemplated by a securities purchase agreement with Scilex, pursuant to which Scilex issued to the Company: 

a. A senior secured promissory note (the “Tranche A Note”), with a principal amount of $101,875, maturing on March 21, 2025 and bearing interest of SOFR plus 8.5%, payable in-kind. Scheduled principal payments are due on December 21, 2023, March 21, 2024, June 21, 2024, September 21, 2024, and December 21, 2024, with the balance due on March 21, 2025. As per the Tranche A Note terms, if the Tranche A Note is not repaid in full on or prior to March 21, 2024, an exit fee of $3,056 is due. Since the Tranche A Note was not repaid by that date, the Company is entitled to the above-mentioned exit fee at the maturity date of the Tranche A Note. As of September 30, 2024, Scilex has repaid $41,700 of the amount due under the Tranche A Note. See the description of the Extension Agreement (as defined below).

b. Warrants to purchase up to 4,500,000 shares of Scilex common stock with an exercise price of $0.01 per share (the “Closing Penny Warrants”) and four additional warrants (the “Subsequent Penny Warrants") each for 2,125,000 shares of Scilex common stock with an exercise price of $0.01 per share. The Closing Penny Warrants were vested on September 21, 2023, and each of the Subsequent Penny Warrants shall vest on each of March 19, 2024, June 17, 2024, September 15, 2024 and December 14, 2024. The Closing Penny Warrants and the Subsequent Penny Warrants shall become exercisable on the earliest of (i) March 14, 2025 and (ii) the date on which the Tranche A Note has been repaid in full.   As of September 30, 2024, 4,500,000 Closing Penny Warrants were vested according to the terms of Tranche A Note, 6,375,000 Subsequent Penny Warrants were vested according to the terms of the Tranche A Note and additional 1,062,500 Subsequent Penny Warrants were vested as per the Extension Agreement (as defined below).   As of September 30, 2024, 4,500,000 Closing Penny Warrants and 2,000,000 Subsequent Penny Warrants are exercisable (see below).

c. Transferred warrants (the “Transferred Warrants”) to purchase 4,000,000 shares of Scilex common stock at $11.50 per share, fully exercisable and expiring on November 10, 2027. On September 20, 2024, the Company sold the Transferred Warrants for consideration of $300 (see below). As a result, as of September 30, 2024 the Company does not hold any Transferred Warrants.

The Company accounted for the Transferred Warrants as derivatives measured at fair value.

The Company elected the fair value option for the Tranche A Note and the Penny Warrants in order to reduce operational complexity of bifurcating embedded derivatives. Changes in value are recorded under financial income, net and include interest income on the Tranche A Note.

The valuation was performed based on several scenarios. Each scenario took into consideration the present value of the Tranche A Note’s cash flows (including the exit fee and the prepayment premium) and the Warrants’ value. The total value of the 2023 Scilex Transaction (and of each of its components) was valued on a weighted average of the different scenarios.

The discount rate of the Tranche A Note was based on the B- rating Zero curve in addition to a risk premium which takes into account the credit risk of Scilex and ranged between 53.05% to 53.08%.

The fair value of the Transferred Warrants was based on their closing price on the Nasdaq Capital Market. The fair value of the Penny Warrants was calculated based on the closing price of the Scilex common stock on the Nasdaq Capital Market, taking into account several scenarios. The difference between the Tranche A Note’s fair value and aggregate unpaid principal balance (which includes interest payable on maturity) is $11,849.

On August 30, 2024, Scilex agreed that 4,500,000 Closing Penny Warrants and 937,500 Subsequent Penny Warrants became exercisable as of such date.

On September 20, 2024, the Company and Scilex entered into an extension agreement (the “Extension Agreement”) to extend the due date of the September 21, 2024 payment (see note 9). Pursuant to the Extension Agreement, Scilex paid to the Company $2,000 on September 23, 2024, which payment is to be applied as follows: (i) $1,700 to the payment due under the Tranche A Note on March 21, 2025 and (ii) $300 to purchase the Transferred Warrants. In addition, 1,062,500 Subsequent Penny Warrants were accelerated from December 15, 2024 and became exercisable into shares of Scilex common stock at any time after September 20, 2024.

As of December 31, 2023, the fair value of the 2023 Scilex Transaction was $110,188, split between the Tranche A Note ($93,066), the Closing Penny Warrant ($9,180), the Subsequent Penny Warrants ($6,502) and the Transferred Warrants ($1,440).

As of September 30, 2024, the fair value of the 2023 Scilex Transaction was $73,080, split among the Tranche A Note ($61,060), Closing Penny Warrant ($4,161) and Subsequent Penny Warrants ($7,859). As a result of the reevaluation of the Tranche A Note, the Company recorded financial loss of $108 for the nine month period ended September 30, 2024.

Based on anticipated gains from the 2023 Scilex Transaction, the Company anticipates taxable income for the fiscal year ending December 31, 2024. As a result, the Company expects to fully utilize its tax loss carryforward and incur associated tax expenses. During the nine month period ended September 30, 2024, the Company recognized tax expenses of $2,767. Tax provision of $2,767 has been classified to accounts payable and accrued expenses. The provision for income taxes in the interim period is determined using an estimated annual effective tax rate (taking into account utilization of carryforward tax losses of the Company).

On October 7, 2024, the Company entered into a convertible note agreement with certain institutional investors and Scilex to refinance $25,000 of the Tranche A Note. For more information see note 9.

Profit Sharing Loan Agreement

On September 4, 2024, the Company entered into a loan agreement (the “Profit Sharing Loan Agreement”) with Rabi Binyamin 4 Tama 38 Ltd. (the “Borrower”) to finance a real estate project (the “Project”). According to the terms of the Profit Sharing Loan Agreement, Oramed agreed to loan NIS 5.5 million ($1,523) (the “Loan Principal”) to the Borrower. NIS 4.7 million ($1,307) was loaned upon signing the Profit Sharing Loan Agreement and an additional NIS 0.8 million ($216) will be loaned upon certain milestones which are expected to occur in the first half of 2025. Upon completion of the Project, the Company is entitled to receive the Loan Principal and the greater of: (i) 20% annual interest of the Loan Principal and (ii) 40% of the Project profits.

The Company decided to designate the Profit Sharing Loan Agreement as a whole under the Fair-Value option in accordance with Accounting Standards Codification Topic 825 “Financial Instruments”.