9. Notes Payable

Secured Notes Payable

In January 2011, the Company entered into a secured credit facility pursuant to a loan and security agreement with certain lenders, which was subsequently amended in December 2011, providing for term loans of up to an aggregate of $30.0 million. On January 26, 2011 and December 30, 2011, the Company drew down $15.0 million and $15.0 million, respectively, of term loans under this secured credit facility. The term loans bear interest at a fixed rate per annum of 11.0% and will mature on August 1, 2014 and January 1, 2015, respectively. Principal and interest payments are due over the remaining term of the loans. As of March 31, 2013, the Company is required to make the following principal payments, in thousands:

Year	Principal
2013	$	8,977
2014	10,847
2015	569
Total	$	20,393

The Company may voluntarily prepay all, but not less than all, outstanding term loans under its secured credit facility at any time, subject to the payment of a premium. With respect to any prepayment, the premium is 5.0%, if such prepayment is made before the amortization date (i.e., to reduce a debt by making payments against the principal balance in installments or regular transfers), 2.0% if such prepayment is made during the 15-month period after the amortization date, and 1.0% if such prepayment is made thereafter. Upon the maturity of any outstanding term loans or the acceleration or prepayment thereof, the Company will also be required to make a final payment equal to 2.5% of the aggregate principal amount, or $750,000, of the term loans borrowed under the secured credit facility. This final payment is being recorded as additional interest expense over the term of the loans. As of March 31, 2013 and December 31, 2012, the Company had accrued $388,000 and $330,000, respectively, related to this final payment, included within notes payable on the consolidated balance sheet.

The Company capitalized financing costs of approximately $498,000 in issuing the secured notes payable, which are being amortized to interest expense over the term of the debt. The balance of deferred financing costs was approximately $209,000 and $233,000 at March 31, 2013 and December 31, 2012, respectively. The carrying value of the secured notes payable at March 31, 2013 and December 31, 2012 includes a debt discount of $281,000 and $328,000, respectively, related to the estimated fair value of the warrants issued in connection with the issuance of the notes. The Company recorded interest expense related to the secured notes payable of approximately $587,000 and $821,000 for the three months ended March 31, 2013 and 2012, respectively. In addition, amortization of debt discount related to notes payable was $141,000 and $141,000 for the three months ended March 31, 2013 and 2012, respectively.

All obligations under the secured credit facility are secured by substantially all of the Company’s existing property and assets (excluding its intellectual property) and subject to certain exceptions, by a pledge of the capital stock of the Company’s U.K. subsidiary and any future subsidiary. The fair value of the secured notes payable approximates its carrying value as of March 31, 2013 and December 31, 2012.

In connection with the Company’s issuance of 7.50% Convertible Senior Secured Notes on May 3, 2013 (See Note 12), the Company repaid the entire amount due under this secured credit facility.