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Borrowings
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
Borrowings Borrowings
Term Loan
The following table summarizes the outstanding borrowings from the term loan as of periods presented:
September 30, 2023December 31, 2022
 (in thousands)
Principal outstanding and final fee$36,720 $35,700 
Less: Unamortized debt issuance costs(88)(73)
          Unaccreted value of final fee(610)(456)
Outstanding debt, net of debt issuance costs and unaccreted value of final fee$36,022 $35,171 
Classified as:
Long-term borrowings$36,022 $35,171 
The outstanding debt is related to a term loan pursuant to the Loan and Security Agreement dated August 12, 2021 entered into by the Company with Silicon Valley Bank (“SVB”). Pursuant the agreement, SVB provided an aggregate principal amount of $35.0 million to the Company (the “SVB Term Loan”).
On January 6, 2023, the Company entered into a First Amendment to Loan and Security Agreement (the “Amendment”) with SVB, which amended the Company's SVB Term Loan pursuant to which the Company had a term loan facility in an aggregate principal amount of $35.0 million (the “Original Loan Agreement” and with the Amendment, collectively the “Amended Loan Agreement”). Upon entry into the Amended Loan Agreement, the Company borrowed $36.0 million pursuant to a term loan (the "Term Loan"), which was substantially used to repay in full the $35.0 million term loan facility outstanding under the Original Loan Agreement and secured a revolving credit facility in an aggregate principal amount of up to $15.0 million (the “Revolver”). On March 14, 2023 all of SVB’s assets and liabilities, including all of SVB’s rights as the lender pursuant to the Amended Loan Agreement, were assigned to Silicon Valley Bridge Bank. On March 27, 2023, all of Silicon Valley Bridge Bank’s assets and liabilities were assigned and assumed by First-Citizens Bank & Trust Company (“First-Citizens”). The Amended Loan Agreement also includes an uncommitted accordion term loan in an aggregate principal amount of up to $15.0 million, which accordion may be approved by First-Citizens solely in its discretion, upon the Company’s request. The Term Loan matures on December 1, 2027 (the “Term Loan Maturity Date”). Interest on the Term Loan will be payable monthly at a floating annual rate set at the greater of the prime rate as
published in the Wall Street Journal plus 0.5% or 6.75%. Commencing on July 1, 2025, the Company will be required to make monthly principal Term Loan amortization payments. A final fee payment of 2% of the original principal amount of the Term Loan is due upon the earlier of the Term Loan Maturity Date, termination, acceleration by First-Citizens following an event of default, or prepayment of the Term Loan. The Company may elect to prepay the Term Loan in whole prior to the Term Loan Maturity Date subject to a prepayment fee equal to 2% of the principal amount of the Term Loan prepaid at such time. No prepayment fee would be due if the Term Loan is refinanced by First-Citizens. Pursuant to the terms of the Amended Loan Agreement, revolving loans may be borrowed, repaid and reborrowed until the maturity date, which will be July 6, 2025 (the “Revolver Maturity Date”). Borrowings under the Revolver are based on 80% of eligible domestic accounts receivable borrowing base. Interest on the outstanding balance of the Revolver will be payable monthly at a floating annual rate set at the greater of the prime rate as published in the Wall Street Journal or 6.25%. Interest on borrowings is due monthly and any principal balance is due on the Revolver Maturity Date, provided that when Revolver Advances are outstanding, in the event the Company does not maintain an adjusted quick ratio of at least 1.5 to 1.0, then falling below such threshold will allow First-Citizens to apply accounts receivable collections to outstanding Revolver borrowings. The Company will pay a total commitment fee of $187,500 on account of the Revolver payable in installments, but fully earned at close. The Company will also be required to pay a fee of $150,000 if it terminates the Amended Loan Agreement or Revolver prior to Revolver Maturity Date. No termination fee would be due if the Revolver is replaced with a new facility with First-Citizens. No amounts were outstanding under the Revolver as of September 30, 2023.
The Company accounted for the Amended Loan Agreement as a debt modification. Accordingly, the remaining unamortized debt issuance costs related to the Original Loan Agreement together with any lender fees incurred in connection with the entry of the Amended Loan Agreement are amortized to interest expense using the straight-line method over the new term of the loan through December 2027.
The effective interest rate related to the First-Citizens Term Loan for the three and nine months ended September 30, 2023 was 9.3% and 8.9%, respectively. The effective interest rate related to the SVB Term Loan for the three and nine months ended September 30, 2022 was 8.3% and 7.1%, respectively.
The table below summarizes the future principal and final fee payments under the Fist-Citizens Term Loan as of September 30, 2023:
Year ending December 31,(in thousands)
Remainder of 2023$— 
2024— 
20258,400 
202614,400 
202713,920 
Total principal and final fee payments$36,720 
The Amended Loan Agreement contains customary events of default, including bankruptcy, the failure to make payments when due, the occurrence of a material impairment on First-Citizens's security interest over the collateral, a material adverse change, the occurrence of a default under certain other indebtedness of the Company and its subsidiaries, the rendering of certain types of judgments against the Company and its subsidiaries, the revocation of certain government approvals, violation of covenants, and incorrectness of representations and warranties in any material respect. In addition, the Amended Loan Agreement contains a financial covenant which requires the Company to maintain, at all times when the Financial Covenant Measuring Period is in effect, certain net revenue levels as agreed upon by the Company and First-Citizens. If the Company does not comply with the various covenants under the Amended Loan Agreement and an event of default occurs under the Amended Loan Agreement, the interest rate on outstanding amounts can increase by 3% and First-Citizens may, subject to various customary cure rights, decline to provide additional advances under the Revolver, require the immediate payment of all amounts outstanding under the Amended Loan Agreement, and foreclose on all collateral.
On March 10, 2023, the Company violated one of the terms of the credit facility by opening bank accounts with another financial institution and transferring funds from SVB. The Company entered into a letter agreement with Silicon Valley Bridge Bank waiving enforcement of this covenant and providing the Company the right to hold a portion of its cash at other financial institutions. A future violation of any covenants could result in a default under the Amended Loan Agreement that would permit First-Citizens to restrict the Company’s ability to further access the Revolving Line of Credit for loans and require the immediate repayment of any outstanding loans under the agreement. As of September 30, 2023, the Company was in compliance with all debt covenants, provided, however, that in order to access future credit advances under the Revolving Line of Credit, the Company will be required to transfer certain cash management accounts back to First-Citizens. As of September 30, 2023, the Company had cash management accounts with a financial institution other than First-Citizens and instructed its customers to direct payments to these separate operating accounts. Until such operating accounts are closed and the funds moved back to cash collateral accounts held at First-Citizens, the Company will be unable to obtain credit advances under the Revolver.