6. 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 provided for interest at a floating rate equal to the prime rate minus 0.75%. The term loan provided 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 met certain sales milestones. As of December 31, 2017, the Company determined it would not meet the sales milestones and as such the term loan was based on a 24-month amortization schedule. 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.

On July 6, 2018, the Company entered into the First Amendment to the 2017 Credit Facility (the Amended Credit Facility). The Amended Credit Facility extends the period of interest-only payments through December 31, 2018, followed by fixed principal and interest payments based on either a 24-month or a 36-month amortization schedule if the Company achieves certain milestones. As of September 30, 2018, the Company determined it would not meet the milestones, as such the Amended Credit Facility will be based on a 24-month amortization schedule. The Amended Credit Facility provides for interest at a floating rate equal to the prime rate minus 0.75%. As of September 30, 2018, the interest rate was 4.50%. The terms of the Amended Credit Facility include the refund of $1.0 million in principal payments previously made by the Company. An end of term fee of 7% 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. As of September 30, 2018, the effective interest rate under the Amended Credit Facility was 7.52%. Borrowings under the Amended Credit Facility mature in December 2020.

In conjunction with the Amended Credit Facility, outstanding warrants held by SVB to purchase 9,229 shares of the Company’s common stock at $26.00 per share were cancelled. The Company subsequently issued a warrant to SVB for the purchase of 9,375 shares of the Company’s common stock at an exercise price of $8.91 per share. The warrant can be exercised at any time and expires five years after the date of issuance. The Company estimated the fair value of the warrant as $43,000 on the date of issuance using the Black-Scholes option pricing model. The warrant was recorded as a discount to the debt and will be amortized into interest expense over the remaining term of the loan using the effective interest method.

Security for the Amended Credit Facility includes all of the Company’s assets except for intellectual property. The Company is required to comply with certain covenants under the Amended 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 limitations on its ability to engage in mergers or acquisitions, sell assets, 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 September 30, 2018. The Amended 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 September 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 Amended Credit Facility at September 30, 2018 was as follows (in thousands):


	Current		Long-Term
	Portion		Debt		Total
Debt, including end of term fee	$	4,500	$	8,340	$	12,840
Less:
Discount attributable to end of term fee, warrant, and debt issuance costs		(38)		(425)		(463)
Net carrying value of debt	$	4,462	$	7,915	$	12,377

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 table below includes the principal repayments due under the Amended Credit Facility as of September 30, 2018 (in thousands):


	Principal Repayment
2018 (remaining three months)	$	—
2019		6,000
2020		6,840
Total principal repayments	$	12,840