Long-term Debt

In May 2012, we entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”), which was amended and restated in November 2014 and further amended on March 2, 2016 and May 23, 2016 (the “Loan Agreement”). As amended, the Loan Agreement provides us with the ability to borrow up to $25.0 million through a revolving line of credit, $7.5 million of which can be advanced at any time during the draw period and $17.5 million of which is subject to an accounts receivable borrowing base. We can draw upon the revolving line of credit through October 31, 2019, when all outstanding principal and accrued and unpaid interest becomes due and payable, and the revolving loans bear interest at a rate equal to the Prime Rate (as defined in the Loan Agreement the “Prime Rate”) plus 0.5% per annum (equal to 4.0% at July 31, 2016). Outstanding revolving loans subject to the accounts receivable borrowing base are limited to the lesser of (a) $17.5 million or (b) 80% of the balance of certain eligible customer accounts receivable plus the greater of $6.0 million million or 30% of eligible foreign accounts receivable. As of July 31, 2016, we had not drawn on the revolving line of credit. Pursuant to the March 2, 2016 amendment, we also procured a supplemental term loan of $2.65 million, which refinanced, replaced and superseded our pre-existing term loan and equipment term loan in their entirety, and paid off the $156,250 end-of-term payment on the outstanding portion of the term loan. We will repay the outstanding principal of the supplemental term loan in monthly installments, plus interest at a rate equal to the Prime Rate plus 0.25% per annum (equal to 3.75% at July 31, 2016), with the last payment due in March 2018. So long as we are not in default, we are permitted to prepay the supplemental term loan in full without premium or penalty.

The Loan Agreement contains customary affirmative covenants and certain financial and negative covenants, including restrictions on disposing of assets, entering into change of control transactions, mergers or acquisitions, incurring additional indebtedness, granting liens on our assets and paying dividends. After the March 2, 2016 amendment, we are required to maintain a minimum adjusted quick ratio of 1.75:1 and a minimum total revenue of $35 million for the six months ended January 31, 2016, $54 million for the nine months ending April 30, 2016 and $74.75 million for the twelve months ending July 31, 2016. For fiscal quarters after July 31, 2016, the minimum total revenue we are required to maintain will be based on our annual plan for the next fiscal year using criteria consistent with the covenant for the twelve months ending July 31, 2016 (as approved by our board of directors). The minimum total revenue requirement for all future periods ending after July 31, 2016 will be subject to further adjustment by SVB. Stemming from non-compliance with a loan covenant at April 30, 2016, on May 23, 2016 we received a waiver of this requirement from SVB and amended the Loan Agreement to modify certain financial covenants. As of July 31, 2016 and 2015, we were in compliance with all loan covenants. We have pledged substantially all of our assets, other than our intellectual property, as collateral under the Loan Agreement.

The Loan Agreement contains customary events of default that include, among others, payment defaults, covenant defaults, bankruptcy defaults, cross-defaults to certain other obligations, judgment defaults and inaccuracy of representations and warranties. Upon the occurrence of an event of default, SVB may elect to declare all amounts outstanding under the Loan and Security Agreement to be immediately due and payable and terminate all commitments to extend further credit. If the Company is unable to repay all amounts outstanding, SVB can proceed against the collateral granted to them to secure such indebtedness. In addition, the occurrence of an event of default will increase the applicable rate of interest by three percentage points for the applicable unpaid loan(s). As of July 31, 2016 and 2015, the Company was in compliance with all loan covenants.

The Company’s outstanding loan balances as of July 31, 2016 and July 31, 2015 are summarized as follows:



	July 31,
Outstanding Loan Balances	2016			2015
	(in thousands)
Silicon Valley Bank term loan	$	—		$	2,934
Silicon Valley Bank equipment loan	—			958
Silicon Valley Bank supplemental loan	2,207			—
Total principal amount	2,207			3,892
Less: Unamortized discount	(7		)	(26		)
Total debt	2,200			3,866
Less: current portion	(1,318		)	(2,079		)
Non-current debt, excluding current portion	$	882		$	1,787

The future principal maturities of debt as of July 31, 2016 are as follows:



	(in thousands)
2017	$	1,324
2018	883
Total	$	2,207

In connection with the original Loan Agreement, the Company issued SVB warrants (“SVB warrants”) to purchase 3,495 shares of common stock during the year ended July 31, 2015. On May 13, 2015, 65,788 warrant shares issued in earlier periods were net exercised on a cashless basis resulting in issuance of 57,082 common shares. Warrants to purchase 3,495 shares have an exercise price of $13.68 and expire in November 2024. The fair value of the SVB warrants was determined using the Black-Scholes option valuation model. As of July 31, 2016 and 2015, 3,495 of these warrants to purchase shares of common stock remained outstanding and exercisable. There were no warrants issued to SVB during the year ended July 31, 2016.

The following assumptions were used to estimate the fair value of the SVB warrants:



	Year Ended July 31,
		2015	2014
Expected volatility		42.0%	—%
Risk-free interest rate		2.3%	—%
Dividend yield		—%	—%
Expected term (in years)		10.0	—