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Long-term debt

9 Months Ended

Sep. 30, 2021

9. Long-term debt

The components of the Company’s long-term debt consisted of the following (in thousands):


	September 30,		December 31,
	2021		2020
Notes payable	$	—	$	25,000
Payment in kind interest		—		1,145
Less: Unamortized discount		—		(1,335)
Long-term debt, net of discount	$	—	$	24,810

Term loan agreements

2018 Term Loan

In April 2018, the Company entered into an $18.0 million term loan with a lender (the “2018 Term Loan”).

The Company repaid the 2018 Term Loan in full in May 2020 using the proceeds from the 2020 Term Loan as discussed below. The Company paid $19.4 million to extinguish the outstanding principal and accrued interest owed, including the non-refundable end-of-term exit fee of $1.3 million (out of which $0.6 million was accrued for in prior years as interest expense) and an early termination fee of $0.1 million.

The loss on extinguishment of debt was $2.9 million which included the write-off of unamortized financing and end-of-term exit fee costs of $0.7 million and $0.1 million in early payment and documentation fees, and was included as a component of other income (expense) in the condensed consolidated statements of operations during the nine months ended September 30, 2020. Interest expense on the 2018 Term Loan totaled less than $0.1 million and $0.8 million for three and nine months ended September 30, 2020, respectively, which includes amortization of the debt discount of less than $0.1 million and $0.2 million during the three and nine months ended September 30, 2020, respectively.

2020 Term Loan

In May 2020, the Company entered into a $60.0 million term loan facility with a new lender (the “2020 Term Loan”), which provides for borrowings of an initial $25.0 million tranche upon closing and options to borrow up to an aggregate of $35.0 million in two additional tranches of $20.0 million under the second tranche (the “Term B Loan”) and $15.0 million under the third tranche (the “Term C Loan”).

At closing, the Company issued warrants to purchase 1,195,652 shares of Series C1 Preferred Stock to the lender with an exercise price of $1.15 per share which were accounted for as debt discount. The Company paid a $0.8 million facility fee in connection with the term loan facility. The Company allocated the $0.8 million term loan facility fee to the three loan tranches on a pro-rata basis based on the amount available to be drawn down under each tranche. The Company allocated $0.3 million to the initial draw which was recorded within debt issuance cost as an offset to the carrying value of the 2020 Term Loan and amortized over the term of the loan within interest expense on the condensed consolidated statement of operations. Additionally, the Company allocated $0.3 million to the Term B Loan and $0.2 million to the Term C Loan, all of which was recorded within prepaid expenses and other current assets on the consolidated balance sheet and is being amortized on a straight-line basis over the debt access period within interest expense on the consolidated statement of operations.

The Company incurred debt issuance costs of $1.5 million in connection with the 2020 Term Loan including $0.9 million of professional fees and $0.6 million for the fair value of the warrants issued with the debt. Interest expense on the 2020 Term Loan totaled $0.7 million and $2.5 million for the three and nine months ended September 30, 2021, respectively, which includes amortization of the debt discount of less than $0.1 million and $0.3 million during the three and nine months ended September 30, 2021, respectively.

In September 2021, the Company repaid the 2020 Term Loan and incurred a debt extinguishment loss of $3.1 million, which was comprised of a $1.8 million prepayment penalty, $1.1 million expense related to unamortized discounts, and $0.2 million in unamortized prepaid facility fees and other charges. As of September 30, 2021, the Company had no outstanding balance on the 2020 Term Loan.

Convertible Notes

In February 2020, the Company issued Convertible Notes to several investors in the aggregate amount of $9.5 million with a stated interest rate of 1.5% per annum and a maturity date of February 28, 2021. The Convertible Notes provided a conversion option whereby upon the closing of a financing event, in which the aggregate gross proceeds of the issuance of preferred stock totaled at least $20.0 million, the notes would automatically convert into shares of the same class and series of capital stock of the Company issued to other investors in the financing at a conversion price equal to 80% of the price per share paid by the other investors. The conversion option met the definition of an embedded derivative and was required to be bifurcated and accounted for separately from the notes. The proceeds from the Convertible Notes were allocated between the derivative liability, with a fair value at issuance of $2.4 million, and the notes, with an initial carrying value of $7.1 million, included in long-term liabilities on the Company’s condensed consolidated balance sheets. The difference between the initial carrying value of the notes and the stated value of the notes represented a discount and that was accreted to interest expense over the term of the Convertible Notes using the effective interest method.

In April 2020, the Convertible Notes, including outstanding principal and accrued interest totaling $9.5 million, were automatically converted into 10,351,063 shares of Series C1 Preferred Stock. Upon conversion, the remaining unamortized discount was recognized as loss on extinguishment of debt in the condensed consolidated statement of operations.

Interest expense on the Convertible Notes was zero and $0.4 million for the three and nine months ended September 30, 2020, respectively, which consists primarily of amortization of the debt discount.