6 – Debt

On March 31, 2010, we entered into a Loan and Security Agreement (LSA) with Hercules Technology II, L.P. (HTGC) whereby we borrowed $10,000,000. This loan bears an interest rate at the greater of 12.35%, or the Federal Reserve Prime Rate plus 7.10%, not to exceed 14%, and has a term of 42 months with interest-only payments for the first nine months. In connection with this loan, we also issued to HTGC a detachable warrant to purchase 627,586 shares of our common stock which expires on March 30, 2015 (see Note 9 for additional information on the warrant). The following table summarizes our debt included in our unaudited condensed consolidated balance sheet as of September 30, 2011 (in thousands):

	Principal		Unamortized Discount
Current portion	$	3,551	$	121
Long-term portion		4,059		122
Total	$	7,610	$	243

We allocated the $10,000,000 of proceeds received to both the debt and the detachable warrant based on the relative fair value of the debt instrument without the warrant and the warrant itself. The relative fair value at the time of issuance was $9,574,000 and $426,000 for the debt and warrant, respectively. The carrying value of the Company's long-term debt approximates fair value because the interest rate approximates current market rates available to the Company. The portion allocated to the warrant was recorded in additional paid-in capital, and will be amortized to interest expense as a discount to the principal balance of the debt. As of September 30, 2011, we had accrued interest of approximately $78,000. There are no financial covenants associated with this debt. As of September 30, 2011, we were in compliance with all nonfinancial covenants. We incurred $164,000 in debt issue costs in connection with securing the LSA, which we have recorded as an asset to be amortized over the life of the loan.