4. Debt

In June 2012, the Company entered into a $3.0 million loan and security agreement collateralized by the Company’s personal property. Interest on advances under the agreement is at a fixed interest rate equal to 4.50%. The loan and security agreement contains only non-financial covenants. Advances under the loan and security agreement have an interest-only period through December 31, 2013 and a 24-month payback period commences in January 2014. The Company was advanced $1 million and $2 million in July 2012 and January 2013, respectively. As such, as of December 31, 2013 and 2012, the Company had $0 and $2.0 million, respectively, in available credit under the loan and security agreement.

In connection with the loan and security agreement, a warrant was issued for shares of Series A Convertible Preferred Stock that is exercisable in whole, or in part, at any time until the expiration date of June 1, 2022. During July 2012, the Company drew down $1.0 million under the loan and security agreement and the warrant became exercisable for 4,000 shares of Series A Convertible Preferred Stock at an exercise price of $7.50 per share. During January 2013, the Company drew down the remaining $2.0 million under the loan and security agreement and the warrant became exercisable for an additional 8,000 shares of Series A Convertible Preferred Stock at an exercise price of $7.50 per share.

The initial $24,250 fair value of the 4,000 warrant shares earned in July 2012 and the initial $49,000 fair value of the 8,000 warrant shares earned in January 2013 were recorded as a debt discount and are amortized to interest expense over the term of the loan using the effective interest method. As of December 31, 2013 and 2012, the Company had unamortized debt discount of $45,947 and $20,208, respectively, related to the initial fair value of the warrants.

The initial fair value of warrants earned in 2013 and 2012 was estimated using the Black-Scholes option pricing model with the following assumptions:


	January 2013			July 2012
Assumed risk-free interest rate		1.86	%		1.43	%
Assumed volatility		80	%		80	%
Expected warrant life		9.5 Years			10 Years
Expected dividend yield		0.0	%		0.0	%

The aggregate advances under the loan and security agreement and unamortized discount as of December 31, 2013 and 2012 are as follows:


	December 31, 2013			December 31, 2012
Aggregate advances under loan and security agreement	$	3,000,000		$	1,000,000
Less unamortized discount		(45,947	)		(20,208	)

Long-term debt, net of debt discount		2,954,053			979,792
Current portion of unamortized discount		23,260			—
Current portion of long-term debt		(1,465,852	)		—

Long-term debt, net of current portion	$	1,511,461		$	979,792

Maturities of long-term debt as of December 31, 2013, are as follows:


	2014	$	1,572,285
	2015		1,572,285

Total minimum payments			3,144,570
Less amount representing interest			(144,570	)

Total outstanding debt			3,000,000
Less current portion			(1,465,852	)

Long-term portion		$	1,534,148

Total interest incurred under the loan and security agreement for the years ended December 31, 2013 and 2012 (excluding amortization of debt discount) was $136,625 and $20,000, respectively.