(4) Capital Facilities

(a)         Credit Facility and Vendor Debt

In May 2010, the Company executed a loan and security agreement with lenders to fund working capital requirements (the “Term Loan Facility”). The Company’s obligations under the Term Loan Facility are secured by a lien on all of the Company’s assets, excluding intellectual property, which is subject to a negative pledge prohibiting the granting of liens thereon to any third party. The Term Loan Facility also includes customary events of default including upon the occurrence of a payment default, a covenant default, a material adverse change (as defined therein) and insolvency. Upon the occurrence of an event of default, the interest on outstanding loans will be increased by 3% over the rate that would otherwise be applicable. In addition, the occurrence of an event of default could result in the acceleration of our obligations under the Term Loan Facility as well as grant the Lenders the right to exercise remedies with respect to the collateral.

Upon execution of the Term Loan Facility, the Company received $5,000 of loan proceeds (“Term A Loans”). The Company was required to make interest-only payments for the first twelve months of the Term A Loan’s 39-month term; therefore at March 31, 2012, the balance of the Term A Loans was $3,148, with $2,222 of that amount being classified as current. The Term A Loans originally bore interest at an annual rate of LIBOR plus 8.75%, subject to a LIBOR floor of 3.00%. In June 2011, the interest rate was reduced to an annual rate of LIBOR plus 8.50%, subject to a LIBOR floor of 3.00%, in accordance with the amendment discussed below. The Term A Loans bear interest at 11.5% at March 31, 2012. In connection with the Term A Loans, the lenders received warrants to purchase 255,376 shares of Series B preferred stock at $0.93 per share, which, upon the Company’s IPO, converted into warrants to purchase 31,861 shares of common stock at $7.45 per share. The fair value of the warrants at the date of issuance of $204 was recorded as deferred financing costs and is being amortized to interest expense through the maturity date of the Term A Loans. As a result of the completion of the Company’s IPO in August 2010, an additional $6,000 of funding became available to the Company under the Term Loan Facility (“Term B Loans”).

In June 2011, the Company and the lenders amended the Term Loan Facility to:

· increase the amount of Term B Loans available to the Company from $6,000 to $10,000;

· require the Company to maintain at least $3,000 of unrestricted cash, which cash requirement shall expire after the occurrence of an equity event resulting in unrestricted cash proceeds to the Company of at least $15,000; and

· reduce the LIBOR rate margin for term loans under the facility from 8.75% to 8.50%.

Concurrently with the amendment, the Company received $10,000 of Term B Loans (representing the total amount of Term B Loans available to the Company under the amended facility). The Company was required to make interest-only payments for the first six months of the Term B Loan’s 26-month term; therefore at March 31, 2012, the balance of the Term B Loans was $8,500 with $6,000 of that amount being classified as current. The Term B Loans bear interest at an annual rate of LIBOR plus 8.50%, subject to a LIBOR floor of 3.00%. The Term B Loans bear interest at 11.5% at March 31, 2012.In connection with the Term B Loans, the lenders received warrants to purchase 59,748 shares of common stock at $7.95 per share. The fair value of the warrants at the date of issuance of $272 has been recorded as deferred financing costs and is being amortized to interest expense through the maturity date of the Term B Loans.

In August 2011, the Company entered into two short-term agreements with third party vendors to finance insurance premiums.  The amount originally financed under the agreements was $532 and was later reduced to $401 due to a reduction of the Company’s insurance premiums. These notes originally had a nine month term and an annual interest rate of 4.5%. In November 2011, one of the loans was paid in full, and as of March 31, 2012 the balance of the remaining short-term loan was $75, which is required to be repaid by May 2012.

(b)         Equity Facility

In August 2011, the Company entered into a common stock purchase agreement (“Purchase Agreement”) with Aspire Capital Fund, LLC (“Aspire Capital”), which provides that Aspire Capital is committed to purchase up to an aggregate of $30,000 of the Company’s common stock over the term of the Purchase Agreement. Upon execution of the Purchase Agreement, the Company issued 84,866 shares of common stock to Aspire Capital as a commitment fee in consideration for entering into the Purchase Agreement (the “Commitment Shares”) and the Company sold 70,721 shares of common stock to Aspire Capital at a per share purchase price of $7.07 resulting in gross proceeds to the Company of $500 (the “Initial Purchase Shares”).  As of March 31, 2012, other than the Commitment Shares and Initial Purchase Shares referenced above, the Company has not made any sales to Aspire Capital.  In order to make future sales of common stock to Aspire Capital pursuant to the Purchase Agreement, the Company must first file, and have declared effective by the SEC, a post-effective amendment to the Company’s S-1 registration statement (File No. 333-175987) covering Aspire Capital’s sale of shares that are issued pursuant to the Purchase Agreement.