5. Notes Payable

In April 2014, we borrowed $2.0 million in connection with a term loan pursuant to a Loan and Security Agreement (LSA) we entered into with a financial institution. Pursuant to the terms of the LSA, we made monthly interest-only payments for outstanding borrowings at an interest rate equal to the greater of (a) prime plus 2.25% or (b) 5.5% until the LSA was amended in December 2014.

In December 2014, we entered into a First Amendment to Loan and Security Agreement (Amended LSA) with the same financial institution. The Amended LSA increased the total term loan availability from $2.0 million to $12.0 million, available in four tranches (in thousands):


		Term Loan		Term Loan
Tranche		Available		Borrowed	Borrowed Date
A	$	2,000	$	2,000	April 2014
B		5,000		5,000	December 2014
C		2,500		—	*
D		2,500		—	*
	$	12,000	$	7,000

*Our ability to borrow under the remaining tranches of $2.5 million each depends upon meeting certain clinical trial milestones. The availability end dates of Tranches C and D are September 1, 2015 and March 31, 2016, respectively.

In connection with the Amended LSA, we borrowed $5.0 million available to us under Tranche B in December 2014. Pursuant to the terms of the Amended LSA, we are required to make monthly interest-only payments for all outstanding borrowings at an interest rate equal to the greater of (a) prime rate plus 3.5% or (b) 6.5% until December 2015. Commencing in January 2016 and continuing through December 2017, we are required to make monthly payments of payments of 1/24th of our principal borrowings plus interest. If we achieve certain clinical trial milestones by August 2015, both the interest-only period and principal maturity date will be extended by six months.

As of March 31, 2015, of our outstanding term loan balance of $7.0 million, $0.9 million will be due within the next twelve months, and is classified as the current portion of long term debt on our balance sheet. Interest expense related to the term loans was $116 thousand for the three months ended March 31, 2015. As of March 31, 2015, we had accrued interest of $39 thousand. There are no financial covenants associated with these term loans. As of March 31, 2015, we were in compliance with all non-financial covenants.