|9 Months Ended|
Sep. 30, 2023
Note 8 – Notes Payable
On April 11, 2023, the Company’s long-term debt facility with Runway Growth Finance Corp. (the “Term Loan”) was terminated upon receipt by Runway of a payoff amount of $30.7 million from the Company comprised of principal, interest and the applicable final payment amount. The loss on extinguishment was recorded in interest expense in the Unaudited Statements of Operations. For the three and nine months ended September 30, 2023 and 2022, the Company recorded the following components in interest expense:
The Company entered into the Term Loan on March 4, 2022. Under the Term Loan, $30.0 million of the $75.0 million loan was funded on the Closing Date, with the remaining $45.0 million fundable if the Company achieved certain predetermined milestones.
The Term Loan accrued interest at a variable annual rate equal to 8.75% plus the greater of (i) 0.50% and (ii) the three month LIBOR Rate for U.S. dollar deposits or the rate otherwise reasonably determined by the Lender to be the rate at which U.S. dollar deposits with a term of three months would be offered by banks in London, England to major banks in the London or other offshore interbank market (the “Applicable Rate”); provided that the Applicable Rate would not be less than 9.25%. On December 7, 2022, the Company entered into the First Amendment (the “First Amendment”) to the Loan Agreement by and between the Company and Runway. The First Amendment amended certain definitions and other provisions of the Loan Agreement to replace LIBOR-based benchmark rates applicable to loans outstanding under the Loan Agreement with SOFR-based rates, subject to adjustments as specified in the First Amendment. The Applicable Rate at September 30, 2022 was 11.69%. For the three and nine months ended September 30, 2023, the Company made interest payments of zero and $1.3 million, respectively, recorded in interest expense in the Unaudited Statements of Operations. For the three and nine months ended September 30, 2022, the Company made interest payments of $0.8 million and $1.8 million, respectively, recorded in interest expense in the Unaudited Statements of Operations.
(1) Balance includes $1.1 million final payment fee.
Amortization of the debt discount associated with the Term Loan was approximately $0.1 million for the nine months ended September 30, 2023, and was recorded in interest expense in the Unaudited Statements of Operations. Amortization of the debt discount associated with the Term Loan was approximately $0.1 million and $0.3 million for the three and nine months ended September 30, 2022, respectively, and was recorded in interest expense in the Unaudited Statements of Operations.
In addition, the Term Loan was secured by a lien on substantially all of our assets other than certain intellectual property assets and certain other excluded collateral, and it contained a minimum liquidity covenant and other covenants that included among other items: (i) limits on indebtedness, repurchase of stock from employees, officers and directors. The Company was not subject to the covenants of the Term Loan as of September 30, 2023. The Company was in compliance with all applicable covenants as of December 31, 2022.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef