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Loans
3 Months Ended
Mar. 31, 2023
Debt Disclosure [Abstract]  
Loans 6. Loans

Equipment and Software Loans

In April 2021, the Company entered into a payment agreement with a financing entity to finance the purchase of $2.4 million of internal use software licenses and related software maintenance from a vendor. The financing entity and vendor are not related. The Company is obligated to repay the financed amount in three equal payments of $0.8 million in May 2021, May 2022, and May 2023. The payment agreement is noninterest bearing and the Company concluded that such interest rate (zero) did not represent fair and adequate compensation to the financing entity for the use of the related funds. Accordingly, the Company approximated the rate at which it could obtain financing of a similar nature from other sources at the date of the transaction. The resulting imputed interest rate was 7% and was used to establish the present value of the payment agreement. The discount is recognized as interest expense in the condensed consolidated statements of operations over the life of the payment agreement.

The Company entered into two more payment agreements in April 2021 and July 2022, with the same financing entity, to finance the purchase of $3.1 million of computer hardware and related hardware maintenance and $1.3 million of internal use software licenses and related ongoing support, respectively. The Company is required to pay three equal payments of $1.0 million in July 2021, June 2022, and June 2023 for the first agreement, and three equal payments of $0.4 million in September 2022, September 2023, and September 2024 for the second agreement. The nature of these agreements and resulting accounting treatment are the same as the payment agreement described in the preceding paragraph, except our imputed interest rate was 9% for the July 2022 agreement.

The total initial present value of the payment agreements was $6.4 million and presented as proceeds from loans in the condensed consolidated statements of cash flows. Such proceeds were used to purchase equipment, software, and related maintenance and are reflected as cash outflows in the investing and operating activities sections in the condensed consolidated statements of cash flows. Repayments are presented as financing cash outflows in the condensed consolidated statements of cash flows.

Interest expense for the three months ended March 31, 2023 and 2022 was less than $0.1 million. Amounts outstanding under the payment agreements are as follows (in thousands):

 

 

March 31, 2023

 

 

December 31, 2022

 

Principal

 

$

2,730

 

 

$

2,730

 

Less: unamortized discount

 

 

(87

)

 

 

(134

)

Total carrying amount

 

 

2,643

 

 

 

2,596

 

Less: current portion (included in accrued and other current liabilities)

 

 

(2,257

)

 

 

(2,218

)

Long-term portion (included in other long-term liabilities)

 

$

386

 

 

$

378