8. Long-term Debt

On March 26, 2009, as amended in June 2011, the Company entered into a loan and security agreement with an independent finance company, Hercules Technology II, LP (Hercules), for up to $7.0 million. The Hercules loan, which has since been repaid, was collateralized by a security interest in all tangible assets. The applicable annual interest rate was 10.15% from December 31, 2013 through April 7, 2014, the date the Company repaid the remaining amount of the Hercules loan in full for a total amount of $3.6 million.

In connection with the Hercules loan, the Company issued warrants to Hercules for the purchase of an aggregate of 21,000 shares of the Series A preferred stock and 26,400 shares of the Series B preferred stock each at an exercise price of $25.00 per share. Immediately prior to the closing of the IPO on February 4, 2014, all of the outstanding shares of the Series A, Series B and Series C preferred stock were automatically converted into shares of common stock on a one-for-one basis. The fair value of the warrants was classified as a liability in the accompanying consolidated balance sheet as of December 31, 2013. After the conversion of Series A and Series B preferred stock, the fair value of the warrants was reclassified as a part of stockholders’ equity. The re-measurement of the liability continued until the date of the closing of the IPO. The fair value of the outstanding Hercules warrants as of the IPO closing date was $0.8 million and was determined using the Black-Scholes option-pricing model with the following assumptions:

 

		FEBRUARY 4, 2014
Stock price		$	32.66
Expected option term (in years)			3.0
Expected volatility			62	%
Risk-free interest rate			0.7	%
Expected dividend yield			0.0	%

 

On February 11, 2014, Hercules net exercised the warrants in exchange for a total of 12,702 shares of common stock. There were no Series A and Series B warrants outstanding at December 31, 2015 and 2014.

The adjustment to this preferred stock warrant liability related to the Hercules warrants was recorded in other income (expense) and amounted to $0, $(0.7) million and $0.2 million for the years ended December 31, 2015, 2014 and 2013, respectively.