9. Debt and Interest

Debt

Total debt consists of the following:

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Oaktree Note

In August 2020, Fortress, as borrower, entered into a $60.0 million senior secured credit agreement with Oaktree Fund Administration, LLC and the lenders from time-to-time thereto (collectively, “Oaktree”) (the “Oaktree Agreement” and the debt thereunder, the “Oaktree Note”).  The Oaktree Agreement contains customary representations and warranties and customary affirmative and negative covenants as well as certain financial covenants, including, among other things, (i) maintenance of minimum liquidity and (ii) a minimum revenue test that requires Journey’s annual revenue to be equal to or to exceed annual revenue projections set forth in the Oaktree Agreement.  Failure by the Company or Journey, as applicable, to comply with the Oaktree Agreement covenants will result in an event of default, subject to certain cure rights of the Company.  The Company was in compliance with all applicable covenants under the Oaktree Agreement as of June 30, 2023.

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The Company is required to make quarterly interest-only payments until the fifth anniversary of the closing date, August 27, 2025, the “Maturity Date,” at which point the outstanding principal amount is due. The Company may voluntarily prepay the Oaktree Note at any time subject to a prepayment fee.  The Company is required to make mandatory prepayments of the Oaktree Note under various circumstances as defined in the Oaktree Agreement.  No mandatory prepayments were required in the six months ended June 30, 2023.

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Journey Working Capital Line of Credit Amendment and Term Loan with East West Bank (“EWB” and collectively, the “EWB Facility”)

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In July 2023, Journey voluntarily repaid the entire $10.0 million outstanding term loan principal balance. The repayment satisfied all of Journey’s outstanding debt obligations under the EWB Facility. Journey has no further obligations to EWB.

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On May 16, 2023, Journey entered into the 2023 Amendment that effected several changes to the EWB facility. Under the 2023 Amendment, Journey paid down $10.0 million of the term loan upon the closing of the 2023 Amendment. The term loan previously contained an interest-only payment period through January 12, 2024, after which the outstanding balance of the term loan was to have been payable in equal monthly installments of principal, plus all accrued interest, through the term loan maturity date. The 2023 Amendment revised the maturity date of the term loan from January 12, 2026 to July 1, 2024 and provided that Journey was no longer required to make monthly installments of principal of the term loan, and instead, was required to make interest-only payments until the maturity date, at which time all principal and all accrued interest would be due. Journey was permitted to prepay all or any part of the term loan without penalty or premium, but could not re-borrow any amount once repaid. The 2023 Amendment removed the revolving line of credit from the EWB Facility effective as of the date of the 2023 Amendment.  Under the 2023 Amendment, Journey was required to maintain a minimum required cash balance of $8.8 million in deposit accounts with EWB.

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Mustang Runway Growth Finance Corp. (“Runway”) Debt Facility  

On April 11, 2023, the $75.0 million long-term debt facility with Runway Growth Finance Corp. (the “Mustang Term Loan” or the “Runway Note”), was terminated upon receipt by Runway of a payoff amount of $30.7 million from Mustang comprising principal, interest and the applicable final payment amount. A loss on extinguishment of $2.8 million was recorded to interest expense in the unaudited condensed consolidated statement of operations for the three and six months ended June 30, 2023.

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Urica 8% Cumulative Convertible Class B Preferred Offering

In December 2022 and February 2023 Urica closed private offerings of its 8% Cumulative Convertible Class B Preferred Stock (the “Urica Preferred Stock”), at a price of $25.00 per share (“Subscription Price”) pursuant to which it sold a total of 135,494 shares of Urica Preferred Stock for gross proceeds of $3.4 million, before deducting underwriting discounts and commissions and offering expenses of approximately $0.5 million (the “Urica Offering”). A non-cash contingent warrant value of $0.1 million was also recorded in debt discount (see Note 6).

Dividends on the Urica Preferred Stock are payable monthly by Fortress in shares of Fortress Common Stock based upon a 7.5% discount to the average trading price over the 10-day period preceding the dividend payment date. Dividends will be recorded as interest expense and were immaterial in 2022. For the three and six month periods ended June 30, 2023, the Company recorded expense of $0.1 million and $0.1 million associated with the Urica dividends owed on the outstanding Urica Preferred Stock.

The shares mandatorily convert into Urica common stock upon either: (i) a qualified financing pursuant to which Urica raises at least $20 million in aggregate gross proceeds; or (ii) a sale of Urica (in each case, at a 20% discount to the lowest price per share at which Urica common stock is issued/sold in such transaction). Additionally, in the event that neither such a qualified financing nor a sale of Urica has occurred prior to June 27, 2024, then each holder of Urica Preferred Stock is eligible to receive, at Fortress’ election, one of: (x) a cash payment equal to the product of the Subscription Price and the number of shares of Urica Preferred Stock held by such holder; (y) a number of shares of Fortress Common Stock equal to the Fortress share exchange amount; or (z) a combination of the foregoing (in each case plus cash in lieu of any fractional shares, plus cash in lieu of accumulated and unpaid dividends otherwise payable in Fortress shares up to the conversion/exchange date).

The Urica Preferred Stock have no voting rights and have liquidation rights on parity with all equity securities issued by Urica, and junior to all equity securities issued by Urica with terms outlining senior rank and current and future indebtedness.

The Company evaluated the terms of the Urica Offering under ASC 480, Distinguishing Liabilities from Equity, and determined the instrument met the criteria to be recorded as a liability. The value at conversion does not vary with the value of Urica’s common shares, therefore the settlement provision would not be considered a conversion feature. Accordingly, the Company determined liability classification is appropriate and as such, this instrument was accounted for as a liability.

Interest Expense

The following table shows the details of interest expense for all debt arrangements during the periods presented. Interest expense includes contractual interest, and fees include amortization of the debt discount and amortization of fees associated with loan transaction costs, amortized over the life of the loan:

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