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 June 30, 2015, of our outstanding term loan balance of $7.0 million, $1.8 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 $117 thousand and $232 thousand for the three and six months ended June 30, 2015, respectively. As of June 30, 2015, we had accrued interest of $38 thousand. There are no financial covenants associated with these term loans. As of June 30, 2015, we were in compliance with all non-financial covenants.