7. Debt

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 June 30, 2018, the interest rate was 4.25%. 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 is 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 cash dividends with respect to its capital stock. The Company was in compliance with all covenants at June 30, 2018. 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 June 30, 2018, 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 June 30, 2018 was as follows (in thousands):


	Current		Long-Term
	Portion		Debt		Total
Debt, including end of term fee	$	6,000	$	5,720	$	11,720
Less:
Discount attributable to end of term fee and debt issuance costs		(17)		(369)		(386)
Net carrying value of debt	$	5,983	$	5,351	$	11,334

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

Capital Lease Obligations

The Company leases certain equipment under a capital lease obligation expiring in October 2020. The balance of the capital lease obligation was $25,000 and $31,000 at June 30, 2018 and December 31, 2017, respectively.

Property and equipment under the capital lease amounted to $31,000 at June 30, 2018 and December 31, 2017. Accumulated depreciation and amortization on these assets was $7,000 and $2,000 at June 30, 2018 and December 31, 2017, respectively.