On September 29, 2020, the Company entered into the Pontifax Agreement, providing up to $25.0 million of borrowings through three facilities of a term loan. An initial loan (“Initial Loan”) of $10.0 million was advanced on September 29, 2020 (“Closing Date”). An additional $5.0 million credit line (“Credit Line”) was available to the Company for withdrawal for a period of 12 months from the Closing Date. The Company paid a fee of 1.0% per annum to Pontifax for the daily average amount not withdrawn under the Credit Line. A third installment loan (“Third Installment Loan”) of $10.0 million was conditioned upon achievement of one of the following milestones by no later than 15 months from the Closing Date: (i) the Company receives non-contingent, non-refundable gross proceeds from one or more equity financings and/or strategic partnerships, in each case consummated following the Closing Date, in the aggregate amount of at least $15.0 million for all such equity financings and strategic partnerships or (ii) the 65thpatient has been enrolled in the URIROX-2 trial. During the three months ended December 31, 2020, the additional $10 million under the Third Installment Loan became available to the Company when the milestone of at least $15 million of gross proceeds from equity financings was achieved. Upon withdrawal of the Third Installment Loan, the Company shall pay Pontifax a one-time fee of 1.0% of the Third Installment Loan. The availability to withdraw amounts available under the Credit Line expired unused on September 29, 2021 and the availability to withdraw amounts available under the Third Installment Loan expired unused on December 29, 2021.

Amounts outstanding under the Pontifax Agreement have a fixed interest rate of 9.0% per annum. The Pontifax Agreement has a term of 48 months and an interest only period of 24 months. Upon the expiration of the interest only period on September 29, 2022, amounts borrowed will be repaid over eight equal quarterly payments of principal and interest. At its option, the Company may prepay all or part of the outstanding borrowings at any time without any prepayment premium or penalty.

The Pontifax Agreement contains negative covenants restricting the Company’s activities, including limitations on dispositions, mergers or acquisitions, incurring indebtedness or liens, paying dividends or making investments and certain other business transactions. There are no financial covenants associated with the Pontifax Agreement. The obligations under the Pontifax Agreement are subject to acceleration upon the occurrence of specified events of default, including a material adverse change in the Company’s business, operations or financial or other condition.

Pontifax, at its option, has the right to convert at any time any portion of the then outstanding borrowings and all accrued but unpaid interest into shares of the Company’s common stock, at the applicable conversion price. The conversion price for borrowings outstanding under the Pontifax Agreement is fixed at $4.10 per share. If the Company consummates a stock split, stock combination, reclassification payment of stock dividend, recapitalization or other similar transaction (each a “Stock Event”), then the applicable conversion price will be proportionately increased or decreased as necessary to reflect the proportionate change in shares of the Company’s common stock issued and outstanding as a result of such Stock Event.

The Company has the right to convert at any time any portion of the then outstanding borrowings and all accrued but unpaid interest into shares of the Company’s common stock, at the applicable conversion price, subject to the fulfillment of both of the following conditions: (i) during a period of 30 consecutive trading days prior to the date on which the Company provides notice of the exercise of its conversion right, the closing price of the Company’s common stock was higher than 1.4 times the applicable conversion price of the term loans on at least 20 trading days, including on the trading day preceding the date on which the Company provides notice of the exercise of its conversion right, (ii) the number of shares of common stock issuable upon conversion by the Company shall not exceed the average weekly number of shares of the Company’s common stock traded on the stock market for the four weeks immediately preceding the date on which the Company provides notice of the exercise of its conversion right.

The shares of the Company’s common stock issued upon conversion will be free of any restrictions and the Company is required to hold at all times a sufficient number of authorized, unreserved and unissued shares of its common stock required to settle any such conversion. As of December 31, 2021, the Company has reserved 2,439,024 shares of its common stock for conversion of the outstanding debt balance.

The Company evaluated the Pontifax Agreement for embedded features that require bifurcation, noting certain features were required to be bifurcated, but were concluded to be de minimis in value at December 31, 2021 and 2020. The Company determined the conversion feature was not required to be accounted for separately. The Company concluded that the embedded conversion option is not subject to separate accounting pursuant to either the cash conversion guidance or the beneficial conversion feature guidance.

As part of the strategic process initiated in January 2022, The Company evaluated the repayment of amounts outstanding under the Pontifax Agreement. Taking into consideration the available cash and cash equivalents at December 31, 2021 along with the termination of its reloxaliase program in March 2022 and its inability to raise sufficient capital to sustain its operations as of the date of this Annual Report, the Company determined it was appropriate to classify the full amount outstanding under the Pontifax Agreement as a current liability given the subjective acceleration of payment under the material adverse change clause. During the first quarter of 2022, the Company made prepayments of principal totaling $5.0 million. The principal amount outstanding as of the filing date of this Annual Report is $5.0 million.

The minimum aggregate future loan and interest payments at December 31, 2021 are as follows (in thousands):


Years Ending December 31,
2022	$	1,927
2023		5,015
2024		4,880
Total minimum payments		11,822
Less: Amount representing interest		(1,822	)
Less: Discount		(148	)
Less: Current portion		(9,852	)
Loan payable, net of current portion	$	—