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 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 extended 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, therefore, the Amended Credit Facility is based on a 24-month amortization schedule and matures in December 2020. The Amended Credit Facility provides for interest at a floating rate equal to the prime rate minus 0.75%. As of March 31, 2019, the interest rate was 4.75%. The terms of the Amended Credit Facility included 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 March 31, 2019, the effective interest rate under the Amended Credit Facility was 7.77%.

The Company is permitted to make voluntary prepayments of the Amended Credit Facility with a prepayment fee, calculated as of the effective date of the first amendment, equal to (i) $240,000 during the first 12 months and (ii) $120,000 if prepaid in months 13-24. The Company is required to make mandatory prepayments of the outstanding loan upon the acceleration by lender following the occurrence of an event of default, along with a payment of the end of term fee, the prepayment fee and any other obligations that are due and payable at the time of prepayment. In the event of default, the interest rate in effect will increase by 5.0% per annum.

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 March 31, 2019. 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 March 31, 2019, 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 March 31, 2019 was as follows (in thousands):


	Current		Long-Term
	Portion		Debt		Total
Credit Facility	$	6,000	$	5,340	$	11,340
Unamortized debt discounts		(28)		(265)		(293)
Net carrying value	$	5,972	$	5,075	$	11,047

The carrying value of the Company’s Amended Credit Facility at December 31, 2018 was as follows (in thousands):


	Current		Long-Term
	Portion		Debt		Total
Credit Facility	$	6,000	$	6,840	$	12,840
Unamortized debt discounts		(33)		(341)		(374)
Net carrying value	$	5,967	$	6,499	$	12,466

The table below includes the principal repayments due under the Amended Credit Facility as of March 31, 2019 (in thousands):


	Principal Repayment
	as of March 31, 2019
2019 (remaining nine months)	$	4,500
2020		6,840
2021		—
2022		—
2023		—
2024		—
Total principal repayments	$	11,340