7. Notes Payable

The Company entered into a credit and security agreement in 2014 (the “2014 Credit Facility”) which had a total borrowing capacity of $15,000 which was fully drawn down. As part of the 2014 Credit Facility a previously outstanding credit agreement issued in 2011 (the “2011 Credit Facility”) was terminated. Additional capacity of $5,000 available to be drawn down under the 2014 Credit Facility was not drawn down and this additional capacity is no longer available to the Company. Promissory notes issued under the 2014 Credit Facility were to mature on April 1, 2018 and were collateralized by substantially all of the Company’s personal property, other than its intellectual property. There were no financial covenants associated with the 2014 Credit Facility; however, there were negative covenants restricting the Company’s activities, including limitations on dispositions, mergers or acquisitions; encumbering its intellectual property; incurring indebtedness or liens; paying dividends; making certain investments; and engaging in certain other business transactions. The obligations under the 2014 Credit Facility were subject to acceleration upon the occurrence of specified events of default, including a material adverse change in the Company’s business, operations or financial or other condition.

The Company was obligated to make monthly, interest-only payments until September 30, 2015 and, thereafter, to pay 30 consecutive, equal monthly installments of principal from October 1, 2015 through March 1, 2018 plus interest. The loan under the 2014 Credit Facility bears interest at an annual rate of 8.25%. In addition, a final payment equal to 3.75% of amounts drawn under the 2014 Credit Facility was due upon its maturity date. This amount was being accreted to the carrying value of the debt, using the effective interest method. In connection with the draw-down in 2014, the lenders received warrants to purchase 100,000 shares of the Company’s Series D-1 redeemable convertible preferred stock with an exercise price of $3.00 per share, which are exercisable until April 2021. The fair value of the warrants as of the issuance date totaling $326 was recorded as a preferred stock warrant liability. Of this amount, $290 was allocated to the 2014 Credit Facility and recorded as debt discount and $36 was allocated to the 2011 Credit Facility and recorded as loss on extinguishment of debt (see below). The effective annual interest rate of the outstanding debt under the 2014 Credit Facility was 11%.

 

The terms of the 2014 Credit Facility required that the existing outstanding borrowings be repaid. Accordingly, on April 17, 2014, the Company repaid $1,898 then due under the 2011 Credit Facility, consisting of $1,667 of principal, $6 of interest and $225 of a final payment. The Company accounted for the termination of the 2011 Credit Facility as an extinguishment in accordance with the guidance in ASC 470-50, Debt. The total amount of unamortized debt discount of $10 was reflected as a loss on extinguishment of debt and included in other expense within the statements of operations and comprehensive loss in 2014. Additionally, fees paid to the lenders that were allocated to the existing debt and treated as an extinguishment, inclusive of the value of warrants issued and debt issuance costs paid, totaling $47, were also reflected as a loss on extinguishment of debt included in other expense within the statements of operations and comprehensive loss in 2014.

In December 2015, the 2014 Credit Facility was amended (the “Amended 2014 Credit Facility”) to increase the aggregate principal amount to $15,600 and extend both the interest-only payment period and the maturity date. At the time of the amendment, the Company had $13,500 in outstanding principal. Net proceeds from the amended 2014 Credit Facility were $1,897. The Company is obligated to make monthly interest-only payments under the Amended 2014 Credit Facility until December 31, 2016 and, thereafter, are required to make monthly payments of principal and interest from January 1, 2017 through December 1, 2019. The interest rate under the Amended 2014 Credit Facility is unchanged at an annual rate of 8.25%. In addition, a final payment equal to 3.75% of amounts drawn under the Amended 2014 Credit Facility is due upon the new maturity date. There are no financial covenants associated with the Amended 2014 Credit Facility and the negative covenants remain unchanged. The Company accounted for the amendment of the Amended 2014 Credit Facility as a modification in accordance with the guidance in ASC 470-50, Debt. Amounts paid to the lenders were recorded as debt discount and a new effective interest rate was established. The effective annual interest rate of the outstanding debt under the Amended 2014 Credit Facility is 10.6%.

As of December 31, 2015, the annual repayment requirements for the Amended 2014 Credit Facility, inclusive of the final payment of $585 due at expiration, were as follows:

 

Year Ending December 31,		Principal				Interest and Final Payment				Total
2016		$	—			$	1,301			$	1,301
2017			5,200				1,105				6,305
2018			5,200				670				5,870
2019			5,200				821				6,021
		$	15,600			$	3,897			$	19,497