|9 Months Ended|
Sep. 30, 2020
On September 27, 2019, we entered into a Credit and Security Agreement (Credit Agreement), dated as of September 27, 2019 (Closing Date) with MidCap Financial Trust (MidCap). The Credit Agreement provides for a $60.0 million term loan credit facility with the following tranches: (i) on the Closing Date, $10.0 million aggregate principal amount of term loans, (ii) until December 31, 2020, an additional $10.0 million term loan facility at our option, (iii) until March 31, 2021, an additional $20.0 million term loan facility subject to the satisfaction of certain conditions and at our option and (iv) until March 31, 2022, an additional $20.0 million term loan facility subject to the satisfaction of certain conditions and at our option. The obligations under the Credit Agreement are secured by a perfected security interest in all of our assets except for intellectual property and certain other customary excluded property pursuant to the terms of the Credit Agreement.
The outstanding principal balance of the loan bears interest at an annual rate of one-month LIBOR plus 5.65%, subject to a LIBOR floor of 1.50% and is payable monthly in arrears. Commencing on October 1, 2019, the Credit Agreement provides that we initially make interest-only payments for 24 months followed by 36 months of amortization payments. The interest-only period will be extended to 36 months and again to 48 months upon the satisfaction of certain conditions set forth in the Credit Agreement. All unpaid principal and accrued interest is due and payable no later than September 1, 2024. A final payment fee of 2.5% of principal is due on the final payment of the term loan.
We may make voluntary prepayments, in whole or in part, subject to certain prepayment premiums and additional interest payments. The Credit Agreement also contains certain provisions, such as event of default and change in control provisions, which, if triggered, would require us to make mandatory prepayments on the term loan, which are subject to certain prepayment premiums and additional interest payments.
As discussed above, at Closing Date, $10.0 million was funded in an initial tranche. In March 2020, we signed a credit extension form for the second tranche amounting to $10.0 million, which we received in May 2020. The facility also gives us the ability to access an additional $40.0 million at our option, subject to the achievement of certain customary conditions.
The following table presents the future minimum payments we expect to make on our outstanding loan as of September 30, 2020 (in thousands):
We paid certain costs and fees totaling $236,000 which were recorded as a direct deduction from the term loan on the balance sheet and are being amortized ratably as interest expense over the term of the loan, using the effective interest method. As of September 30, 2020, the unamortized issuance costs and debt discounts amounted to $164,000.
Interest expense, including amortization of the debt discount and accretion of the final fees, related to the Credit Agreement was $429,000 and $1.0 million, respectively, for the three and nine months ended September 30, 2020. Accrued interest was $233,000 as of September 30, 2020. As of September 30, 2020, the outstanding balance of the loan was $19.8 million, net of unamortized debt discount.
The Credit Agreement contains certain covenants which, among others, require us to deliver financial reports at designated times of the year and maintain minimum net revenues and $10.0 million of cash in order to draw tranche three or tranche four. As of September 30, 2020, we were not in violation of any covenants.
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://fasb.org/us-gaap/role/ref/legacyRef