6. Notes Payable

The Company has outstanding amounts due under a loan and security agreement with Oxford Finance LLC and Midcap Financial, or the 2014 Credit Facility, entered into in March 2014. All promissory notes issued under the 2014 Credit Facility are collateralized by substantially all of the Company’s personal property, other than its intellectual property. There are no financial covenants associated with the 2014 Credit Facility; however, there are negative covenants restricting the Company’s activities, including limitations on dispositions, mergers or acquisitions; encumbering or granting a security interest in its intellectual property; incurring indebtedness or liens; paying dividends; making certain investments; and certain other business transactions.

Upon entering into the 2014 Credit Facility, the Company was obligated to make monthly, interest-only payments on any term loans funded under the 2014 Credit Facility until December 1, 2014 and, thereafter, to pay 36 consecutive, equal monthly installments of principal and interest from January 1, 2015 through December 1, 2017. As per the terms of the agreement, in June 2014, upon the completion of the Company’s IPO, the term of monthly, interest-only payments were extended until June 1, 2015. Outstanding term loans under the 2014 Credit Facility bear interest at an annual rate of 8.1%. In addition, a final payment equal to 6.0% of any amounts drawn under the 2014 Credit Facility is due upon the earlier of the maturity date, acceleration of the term loans or prepayment of all or part of the term loans. The Company accrues the final payment amount due of $0.5 million, to outstanding debt by charges to interest expense using the effective-interest method from the date of issuance through the maturity date.

The Company was obligated to pay a separate fee upon any IPO; a sale of substantially all of the Company’s assets; or a merger, reorganization or sale of the Company’s voting equity securities where existing voting stockholders hold less than 50% of voting equity securities after such transaction.

The 2014 Credit Facility also includes events of default, the occurrence and continuation of any of which provides the lenders the right to exercise remedies against the Company and the collateral securing the loans under the 2014 Credit Facility, including cash in the amount of the outstanding balance. These events of default include, among other things, failure to pay any amounts due under the 2014 Credit Facility, insolvency, the occurrence of a material adverse event, the occurrence of any default under certain other indebtedness and a final judgment against the Company in an amount greater than $0.3 million.

As of December 31, 2016 and 2015, notes payable consist of the following:

 

		December 31,
		2016
		(in thousands)
Notes payable			3,183
Debt discount, net of accretion			(9	)
Accretion related to final payment			415
Notes payable, net of discount, short term		$	3,589

 

		December 31,
		2015
		(in thousands)
Notes payable		$	6,119
Less: current portion			(2,936	)
Notes payable, net of current portion			3,183
Debt discount, net of accretion			(36	)
Accretion related to final payment			306
Notes payable, net of discount, long term		$	3,453

As of December 31, 2016, the estimated future principal payments due are as follows:

 

Years Ending December 31,
(in thousands)
2017		$	3,183
Total		$	3,183

During the years ended December 31, 2016 2015 and 2014, the Company recognized $0.5 million, $0.8 million and $0.9 million, respectively, of interest expense related to the 2014 Credit Facility. The effective annual interest rate of the outstanding debt under the 2014 Credit Facility is approximately 10.8%.