Loan Payable

6 Months Ended

Jul. 04, 2015

Debt Disclosure [Abstract]

Note 6. Loan Payable

On June 17, 2015, the Company and Hercules Technology II, L.P entered into Amendment No. 1 (the “Amendment”) to the Loan and Security Agreement entered into by the parties on September 29, 2014 (the “Agreement”). The terms of the Agreement provided the Company with access to a term loan of up to $5 million. The first $2.5 million of the term loan was funded at closing. The remaining $2.5 million of the term loan was to be drawn down in part or in full at our option at any time but no later than July 31, 2015.  The first advance and second advance, if any, were to be repaid in equal monthly installments through the loan’s maturity on April 1, 2018, following an initial interest-only period that was to conclude on October 31, 2015.

Pursuant to the Amendment, the parties agreed that the interest only period shall be extended to March 31, 2016, provided however that if the Company’s consolidated revenue is equal to or greater than $11.5 million for the six months ending December 31, 2015, then the interest-only period shall be extended to June 30, 2016.  The maturity date remains unchanged at April 1, 2018 and any remaining principal balance of the loan and all unpaid interest shall be due on the maturity date.  The Amendment became effective on June 18, 2015 upon the funding of the full amount of the $2.5 million second advance and payment of a nonrenewable facility fee of $15,000 to the Agent.

The second advance of $2.5 million is treated as if the Company entered into a separate loan.  The facility fee of $15,000 is treated as debt issuance costs and are being amortized as interest expense using the effective interest method over the term of the loan.  There is also additional $93,750 end of term charge the Company will pay, which is 3.75% of the $2.5 million drawn.  The end of term charge is being accrued as additional interest expense using the effective interest rate method over the term of the loan.

The Company determined that the amended terms of the first advance of $2.5 million on September 29, 2014 were not substantially different from the original terms.  The Company therefore did not apply debt extinguishment treatment, but rather accounted for prospectively as yield adjustments, based on the revised terms.

Loan payable as of July 4, 2015 consists of the following:

Principal amount payable for following years ending December
2015	$	-
2016		905,393
2017		1,945,650
2018		2,148,957
Total principal payments		5,000,000
Accrued end of term charge		31,410
Total loan payable		5,031,410
Less unamortized debt issuance costs and debt discount		253,796
Less current portion		148,591
Loan payable – long term	$	4,629,023

The total interest expenses related to the term loan, including cash interest payments, the amortizations of debt issuance costs and debt discount, and the accrual of the end of term charge were approximately $115,000 and $221,000 for the three and six months ended July 4, 2015.  For the three and six months ended June 28, 2014, the Company did not have any interest expense related to loan payable as the Company did not have any outstanding balance.