5. Debt and Related Warrants

Prior Facilities

In June 2015, the Company executed a Loan and Security Agreement with Ares Venture Finance (2015 Credit Facility) comprising an $8.0 million term loan and a $4.0 million revolving loan. The term loan provides for interest at a floating rate equal to the greater of (a) 8.75% or (b) LIBOR plus 7.75% and has a term of four years. The term loan is payable in 15 monthly installments of interest only and 33 payments of principal and interest with an end-of-term fee of $180,000 due upon maturity. The revolving loan provides for interest at a floating rate equal to the prime rate plus 3.75% and has a term of two years. The Company may draw upon the loan facility for working capital purposes as required depending upon accounts receivable balances and other required conditions. In January 2016, the Company borrowed $1.5 million from the revolving loan.

Security for the 2015 Credit Facility includes all of the Company’s assets except for leased equipment. The 2015 Credit Facility contains customary covenants restricting the Company’s activities, including limitations on its ability to sell assets, engage in mergers and acquisitions, enter into transactions involving related parties, incur indebtedness or grant liens or negative pledges on its assets, make loans or make other investments. Under these covenants, the Company is prohibited from paying dividends with respect to its capital stock. The Company was in compliance with all covenants at December 31, 2016.

In April 2017, the Company repaid the outstanding balance of $1.1 million on the revolving loan at which time the unamortized balance of the debt discount of $10,000 was recognized as a loss on extinguishment of debt. In May 2017, the Company repaid the outstanding principal balance of $6.2 million on the term loan at which time the unamortized balance of the debt discount was $175,000, and paid a prepayment penalty of $61,000. The unamortized debt discount balance and the prepayment penalty were recognized as a loss on extinguishment of debt in the statements of operations and comprehensive loss.

2017 Credit Facility

On May 4, 2017, the Company entered into a Loan and Security Agreement with Silicon Valley Bank (2017 Credit Facility) for a $12.0 million term loan. The term loan provides for interest at a floating rate equal to the prime rate minus 0.75%. As of December 31, 2017, the interest rate was 3.75%. The term loan provides for a period of interest-only payments through April 30, 2018, followed by fixed principal and interest payments based on either a 24-month amortization schedule or a 36-month amortization schedule if the Company meets certain sales milestones. As of December 31, 2017, the Company determined it would not meet the sales milestones and as such the term loan will be based on a 24-month amortization schedule. Borrowings under the 2017 Credit Facility mature in May 2020. The Company is required to comply with certain covenants under the 2017 Credit Facility, including requirements to maintain a minimum liquidity ratio, meet certain revenue targets, and restrictions on certain actions without the consent of the lender, such as the disposal and acquisition of its business or property, changes in business, and mergers or acquisitions. An end of term fee of 6% of the amount borrowed must be made when the loan is prepaid or repaid, whether at maturity or as a result of a prepayment or acceleration or otherwise. The additional payment is being accreted using the effective interest method.

Security for the 2017 Credit Facility includes all of the Company’s assets except for intellectual property. The 2017 Credit Facility contains customary covenants restricting the Company’s activities, including limitations on its ability to sell assets, engage in mergers and acquisitions, enter into transactions involving related parties, incur indebtedness or grant liens or negative pledges on its assets, make loans or make other investments. Under these covenants, the Company is prohibited from paying dividends with respect to its capital stock. The Company was in compliance with all covenants at December 31, 2017. The 2017 Credit Facility contains a material adverse effect clause which provides that an event of default will occur if, among other triggers, an event occurs that could reasonably be expected to result in a material adverse effect on the Company’s business, operations or condition, or on the Company’s ability to perform its obligations under the term loan. As of December 31, 2017, management does not believe that it is probable that the clause will be triggered within the next twelve months, and therefore the term loan is classified as long-term.

The carrying value of the Company’s 2017 Credit Facility at December 31, 2017, was as follows (in thousands):


	Current		Long-Term
	Portion		debt		Total
Debt, including end of term fee	$	4,000	$	8,720	$	12,720
Less:
Discount attributable to end of term fee and debt issuance costs		(23)		(563)		(586)
Net carrying value of debt	$	3,977	$	8,157	$	12,134

The carrying value of the Company’s Prior Facilities at December 31, 2016, was as follows (in thousands):


	Current		Long-Term
	Portion		debt		Total
Debt, including end of term fee	$	4,054	$	4,301	$	8,355
Less:
Discount attributable to warrants, end of term fee and debt issuance cost		(177)		(83)		(260)
Net carrying value of debt	$	3,877	$	4,218	$	8,095

The table below shows the principal repayments due under the 2017 Credit Facility as of December 31, 2017 (in thousands):


	Principal Repayment
	as of December 31,
2018	$	4,000
2019		6,000
2020		2,720
Total principal repayments	$	12,720

Capital Lease Obligations

The Company leases certain equipment under capital lease obligations expiring in October 2020. The balance of the capital lease obligations was $31,000 and $7,000 at December 31, 2017 and 2016, respectively.

Property and equipment under capital leases amounted to $31,000 and $440,000 at December 31, 2017 and 2016, respectively. Accumulated depreciation and amortization on these assets was $2,000 and $433,000 at December 31, 2017 and 2016, respectively.

Future minimum rental commitments under the Company’s capital lease obligations are $11,000, $10,000, and $10,000 for the years ended December 31, 2018, 2019, and 2020, respectively.