Note 8. Debt Obligations.

Growth Term Loan

In August 2014, the Company entered into a Loan and Security Agreement (the “Growth Term Loan”) with a syndicate of two lending institutions, Oxford Finance LLC and Silicon Valley Bank, which was amended in August 2015 and June 2016. The first tranche of the Growth Term Loan (“Growth Term Loan A”) of $11.0 million was funded in August 2014. The second tranche of $5.0 million (“Growth Term Loan B”) was funded in March 2016. With the August 2015 amendment, the interest-only payment period for the Growth Term Loan was extended until April 1, 2016. Following the interest-only payment period, the Company became obligated to make equal monthly payments of principal and interest amortized over the remaining term of the loan for all funds drawn under the Growth Term Loan. Growth Term Loan A and B bear interest at the fixed rates of 8.5% and 8.75%, respectively, and mature in September 2018. The amended agreement includes the following prepayment fees: (i) 2% of the principal amount repaid if the growth term loan is prepaid after the first anniversary but on or prior to the second anniversary of the August 2015 amendment and (ii) 1% of the principal amount repaid if the growth term loan is repaid after the second anniversary of the August 2015 amendment and prior to maturity.

The Growth Term Loan requires the Company to maintain compliance with specific operating and reporting covenants and does not require financial covenants. The Growth Term Loan is secured by a lien covering substantially all of the Company’s assets, excluding patents, trademarks and other intellectual property rights (except for rights to payment related to the sale, licensing or disposition of such intellectual property rights) and certain other specified property. If the Company were to default under the Growth Term Loan, its lenders could foreclose on its assets, including substantially all of its cash, which is held in accounts with its lenders.

The principal repayments due under the term loan as of December 31, 2016, are as follows:

2017	$	6,389,782
2018		5,163,822
Total Growth Term Loan payments		11,553,604
Less discount and deferred financing costs		(263,378	)
Plus final fee premium		488,693
Total Growth Term Loan, net	$	11,778,919

Following the August 2015 amendment, the final payment percentage on the Growth Term Loan was increased to 4.75%. After amendment, the final fee premium relating to Growth Term Loan A is $522,500. The final fee premium relating to the Growth Term Loan B is $237,500. Each final fee premium is being amortized to interest expense, using the effective interest method, over the term of the related Growth Term Loan tranche. Total Growth Term Loan final fee premium amortization for the year ended December 31, 2016 was $273,786, compared to $158,707 for the year ended December 31, 2015.

The Company received Growth Term Loan A proceeds net of a $0.3 million original issuance discount. In addition, in connection with Growth Term Loan A, the Company issued preferred stock warrants to the lenders exercisable for 2,512,562 shares of Series E redeemable convertible preferred stock (“Series E Stock”) at a price of $0.2189 per share, which resulted in the recording of a warrant discount. Upon the completion of the IPO in May 2015, the warrants were automatically converted to common stock warrants exercisable for up to 23,396 shares of common stock at an exercise price of $23.51 per share. The warrants expire on August 22, 2024. The original issuance discount and warrant discount are being amortized, using the effective interest method, over the term of the Growth Term Loan A.

In connection with the funding of the Growth Term Loan B, in March 2016, the Company issued Oxford Finance LLC a common stock warrant exercisable for 45,307 shares of common stock at an exercise price of $2.759 per share, and the warrant issued to Silicon Valley Bank automatically became exercisable for an additional 5,317 shares of common stock at an exercise price of $23.51 per share in accordance with the terms of the Growth Term Loan. The fair value of this discount of $122,460, was calculated using the Black-Scholes option pricing model at March 31, 2016. The warrant discount is being amortized to interest expense, using the effective interest method, over the term of the Growth Term Loan B.

Total amortization expense for the Growth Term Loan A and B warrant discounts and the Growth Term Loan A original issuance discount was $249,868 and $170,954 for the years ended December 31, 2016 and 2015, respectively, and is included in interest expense in the accompanying statements of operations.

The Company has also recorded approximately $24,909 and $52,377 of deferred financing costs net of the related debt in the accompanying balance sheets as of and December 31, 2016 and 2015, respectively, in accordance with ASU 2015-03, which was adopted on January 1, 2016. Growth Term Loan deferred financing cost amortization expense was $27,468 and $22,754 for the years ended December 31, 2016 and 2015, respectively, and is included in interest expense in the accompanying statements of operations.

The June 2016 Growth Term Loan amendment modified the definitions of permitted indebtedness and permitted liens to provide for an increased maximum amount of permitted indebtedness, authorize a new category of permitted indebtedness and authorize a new category of permitted liens.

Convertible Notes

On December 30, 2014, the Company entered into two separate subordinated convertible promissory note agreements (the “Note Agreements”). The Note Agreements provided that upon a qualified equity financing, pursuant to which the Company raised either through a qualified initial public offering of common stock or through a qualifying private placement of convertible preferred stock, gross offering proceeds of at least $20,000,000 from the sale of shares to new investors, the outstanding principal amount and all accrued but unpaid interest under convertible notes issued pursuant to the Note Agreements would automatically convert into shares of common stock or preferred stock, whichever was sold in the offering. The number of shares into which the convertible notes were convertible was equal to the outstanding principal and accrued interest divided by the price per share paid by investors purchasing such newly issued equity securities.

Draws under the first Note Agreement in February, March and April 2015 totaled $4.5 million. There were no draws under the second Note Agreement prior to the IPO in May 2015. The Company recorded a $741,828 discount for the estimated fair value of warrants issued in connection with the debt and $75,520 of deferred financing costs incurred in connection with the issuance of notes under the Note Agreements. Amortization of the Note Agreement discount and deferred financing fees associated with the Note Agreements was $0 and $112,134 for the years ended December 31, 2016 and 2015, respectively, which was included in interest expense in the accompanying statements of operations.

Settlement of Convertible Debt upon IPO Closing

Upon closing of the IPO in May 2015, all outstanding principal ($4.5 million) and accrued interest under the convertible notes issued pursuant to the first Note Agreement was converted into 324,591 shares of common stock at a conversion price of $14.00 per share. The Company evaluated the terms of the Note Agreement at inception and concluded that it should be accounted for as share settled debt as it falls within the scope of ASC 480, Distinguishing Liabilities from Equity. While the issued Note Agreements contain multiple events that could trigger settlement at different values, the Company evaluated all of the possible outcomes and considered the qualified initial public offering outcome to be predominant at more than a 50% probability of occurrence. The IPO settlement triggering event settles the fixed monetary amount of the debt known at inception with a variable number of shares of common stock based on the price of the common stock at settlement and therefore meets the definition of share settled debt. The Company compared the value of the common stock issued to settle the debt with the carrying amount of the debt at the IPO closing date of May 2015, net of unamortized discount and deferred financing costs, and recognized a loss on settlement of debt of $705,217 in the accompanying statements of operations for the year ended December 31, 2015. The value of the debt adjusted to the value of the common stock paid was reclassified from debt to equity.