Quarterly report pursuant to Section 13 or 15(d)

Notes Payable

v3.23.3
Notes Payable
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
Notes Payable Notes Payable On June 4, 2021, the Company entered into a $35.0 million venture loan and security agreement (the “Loan Agreement”) with Horizon Technology Finance Corporation (“Horizon”) and Powerscourt Investments XXV, LP (“Powerscourt”, and together with Horizon, the “Lenders”). Between June and September of 2021, the Company borrowed the full $35.0 million (the “Note”) available under the Loan Agreement. In the second quarter of 2022, the Company, as collectively agreed upon with the Lenders, prepaid $15.0 million of principal and accrued interest. In June of 2023, the Company, as collectively agreed upon with the Lenders, prepaid $6.0 million of principal. On September 22, 2023, the Company and the Lenders entered into a Payoff Letter (the “Payoff Letter”), pursuant to which the Company repaid all outstanding principal, inclusive of the final payment fee, and interest under the Loan Agreement in the aggregate amount of $14.3 million. As a result of the payment, all obligations of the parties under the Loan Agreement were deemed satisfied and terminated.
On June 4, 2021, pursuant to the Loan Agreement, the Company issued warrants to the Lenders to purchase 33,656 shares of the Company’s common stock with an exercise price of $31.20 per share (the “Warrants”). The Warrants are exercisable for ten years from the date of issuance. Pursuant to the Payoff Letter, Avalo’s obligations under the Warrants shall survive pursuant to the original terms at issuance. The Warrants, which met equity classification, were recognized as a component of permanent stockholders’ equity within additional paid-in-capital and were recorded at the issuance date using a relative fair value allocation method.

The Company recognized debt issuance costs and the amount allocated to the warrants as a debt discount on the date of issuance and amortized these costs to interest expense using the effective interest method over the original term of the loan. As a result of the payoff in the third quarter of 2023, the Company accelerated the remaining $0.9 million amortization of the debt discount, which was recognized as interest expense for the three and nine months ended September 30, 2023.

Balance sheet information related to the note payable for the Notes is as follows (in thousands):

As of
  September 30, 2023 December 31, 2022
Initial Note $ —  $ 12,139 
Second Note —  6,070 
Third Note —  3,035 
Notes payable, gross1
$ —  $ 21,244 
Less: Unamortized debt discount and issuance costs —  1,828 
Carrying value of notes payable, current $ —  $ 19,416 
Less: Current portion —  5,930 
Carrying value of notes payable, non-current $ —  $ 13,486 

1 Balance as of December 31, 2022 includes $1.1 million final payment fee for the Notes, which represents 3% of the original principal loan amount.

As of September 30, 2023, there were no remaining contractual future principal payments.