Term Loans

6 Months Ended

Jun. 30, 2022

Term Loans

Term Loans

7.    Term Loans

On June 24, 2021, the Company announced it had negotiated a second amendment to the Bridge Bank Loan and Security Agreement with Bridge Bank. This amendment provides Fennec with a $20,000 debt facility comprised of three term loans.  Term Loan A consists of $5,000, which was funded upon closing. Term Loan B consists of $7,500 to be funded upon NDA approval of PEDMARK^TM in the U.S.  Term Loan C consists of $7,500 to be funded upon the occurrence the Company achieving consolidated trailing six-month revenues of $11,000 on or before December 31, 2022.  The interest-only period for the facility has the ability to be extended from 18 months to 24 months from the funding of Term Loan B,

provided that Term Loan C is funded, and certain conditions are met.  The Company intends to use the proceeds from the loans to provide working capital for commercial readiness activities prior to NDA approval as well as commercialization activities for PEDMARK^TM, if approved by the FDA.

On June 24, 2021, the Company drew $5,000 from Term Loan A. Term Loan A matures on July 1, 2025. Payments are for interest only through December 31, 2022. The Company shall make equal monthly payments of principal, together with applicable interest, following the interest only period until the maturity date. Interest shall accrue on the outstanding balance at a rate of 1% above prime as published by the Wall Street Journal on the first day of each month (5.75% at June 30, 2022). The Company is obligated to maintain a cash balance greater or equal to three times its monthly cash burn as calculated on the last date of the immediately preceding month. If Company fails to maintain the aforementioned cash balance, the bank can call the full amount of loan outstanding.

Collateral for Term Loan A, B and C shall not include any copyrights, patents, trademarks, servicemarks and applications therefor, now owned or hereafter acquired, or any claims for damages by way of any past, present, and future infringement of any of the foregoing (collectively, the “Intellectual Property”); provided, however, that the Collateral shall include all accounts and general intangibles that consist of rights to payment and proceeds from the sale, licensing or disposition of all or any part, or rights in the foregoing (the “Rights to Payment”). Notwithstanding the foregoing, if a judicial authority (including a U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary to have a security interest in the Rights to Payment, then the Collateral shall automatically, and effective as of the Effective Date, include the Intellectual Property to the extent necessary to permit perfection of Bridge Bank’s security interest in the Rights to Payment.

Aggregate annual payments due on Term Loan A as of June 30, 2022 are as follows (in thousands):

Years Ending December 31,		Amount
2022	$	—
2023		2,000
2024		2,000
2025		1,000
Total future payments		5,000
Less: unamortized debt discount		(10)
Total term loan, net of debt discount	$	4,990

In the event of default or change of control, all unpaid principal and all accrued and unpaid interest amounts (if any) become immediately due and payable including the prepayment fee. Events of default include, but are not limited to, a payment default, failure to achieve Approval Event before September 30, 2022, a material adverse change, and insolvency. The Bridge Bank facility is secured by all of the Company’s assets, including all capital stock held by the Company.

Debt issuance costs amounting to $55 securing access to Term Loans A, B and C were paid in cash to Bridge Bank on June 24, 2021. This amount was capitalized and is being amortized over the access period of the Term Loans. Upon drawing Term Loan A, the Company recorded a debt discount of $14, which was based on a pro-rata allocation of the issue costs to Loan A, reducing the capitalized amount by the same amount. The debt discount is being amortized over the life of Term Loan A.