10. Long Term Debt

Loan agreement

On April 14, 2014, the Company executed a Loan Agreement with a lender, as subsequently amended in March 2015, January 2016, March 2017, August 2018, and October 2018. As of December 31, 2018, there were no additional amounts available to borrow under the debt facility. The interest rate on this term loan is variable based on a calculation of the prime rate less 5.25% with a minimum interest rate of 8%. Interest is paid monthly beginning the month following the borrowing date. At loan inception and in connection with the amendments, the Company issued the lender warrants to purchase shares of stock. The Loan Agreement also contains prepayment penalties and an end of term charge. Fees incurred in execution of the agreements, and the fair value of warrants on the date of grant were accounted for as a reduction in the book value of debt and accreted through interest expense, using the effective interest rate method, over the term of the debt.

In connection with the Loan Agreement, the Company granted the lender warrants to purchase shares of either Series C Preferred Stock or shares of preferred stock in the next financing round. Following the completion of the IPO, these warrants became exercisable for shares of the Company’s common stock. Therefore, additional warrants will be issued if the Company draws on any of the remaining debt facility. The warrants issued in connection with the initial borrowing were initially recorded at fair value of $0.1 million as a preferred stock warrant liability in the accompanying consolidated balance sheets and a corresponding debt discount was recorded. The Company has not further drawn on the remaining debt facility.

The Company also incurred debt issuance costs of $0.1 million. As a result of the debt discounts recorded related to the warrants and the debt issuance costs, the debt was initially recorded at less than its face value. The debt, including the end of term charge, is being accreted over the life of the loan using the effective interest method.

The Loan Agreement also provided the lender with a right to invest up to $1.0 million or, subject to Company approval and consent, to convert up to $1.0 million of outstanding principal into shares of preferred stock in the next financing round at the same price as all other investors. The lender invested $1.0 million in March 2016 as part of the Series D Preferred Stock financing.

Amendment 1 to loan agreement

On March 4, 2015, the Company executed Amendment 1 to the Loan Agreement (Amendment 1) and borrowed the remaining $5.0 million that was available under the loan facility. The terms of Amendment 1 allowed the Company to defer the commencement of principal payments to December 1, 2015 and extended the loan maturity date to February 1, 2018. If the Company obtained at least $10.0 million in equity financing before December 1, 2015, the commencement of principal payments could be further deferred until March 1, 2016 and the loan maturity date could be extended to May 1, 2018. As the financing milestone was not achieved, the Company made the first principal payment of $0.3 million on December 1, 2015 and the loan maturity date was February 1, 2018 under Amendment 1.

The additional $5.0 million borrowed included an additional $0.2 million end of term charge. The end of term charge on this borrowing is being accreted over the life of the loan as additional interest expense. The additional borrowing also resulted in the issuance of additional warrants with a grant date fair value of $0.1 million. The fair value of the additional warrants were initially recorded at fair value as a preferred stock warrant liability in the accompanying consolidated balance sheets and a corresponding debt discount was recorded. The debt, including the end of term charge, is being accreted over the remaining life of the loan using the effective interest method.

Amendment 2 to loan agreement

In January 2016, the Company executed Amendment 2 to the Loan Agreement (Amendment 2). Amendment 2 increased the total facility available by $5.0 million to a total of $15.0 million and further delayed the commencement of principal payments to July 1, 2016. Under Amendment 2, following the Series D Preferred Stock financing (Note 8), the Company could have elected to further delay the commencement of principal payments until January 1, 2017, however the Company voluntarily began paying principal on July 1, 2016. Upon signing Amendment 2, the Company drew an additional $3.0 million under the debt facility. The remaining $2.0 million available under the facility expired unexercised in April 2016, which reduced the amounts available under the facility to $13.0 million.

The additional $3.0 million borrowed included an additional $0.1 million end of term charge. The end of term charge on this borrowing is being accreted over the life of the loan. The additional borrowing also resulted in the issuance of additional warrants with a grant date fair value of $0.1 million. The fair value of the additional warrants were initially recorded at fair value as a preferred stock warrant liability in the accompanying consolidated balance sheets and a corresponding debt discount was recorded. The debt, including the end of term charge, is being accreted to over the remaining life of the loan using the effective interest method.

Amendment 3 to loan agreement

In March 2017, the Company signed Amendment 3 to the Loan Agreement (Amendment 3). Amendment 3 increased the total facility available by $5.0 million to a total of $18.0 million. Additionally, the lender may provide an additional optional term loan, solely at the lender’s discretion, for an incremental $5.0 million, increasing the total potential facility to $23.0 million. As of December 31, 2017, the Company has not drawn any of this additional facility. The terms of Amendment 3 allowed the Company to defer the commencement of principal payments to March 1, 2018 and extended the loan maturity date to March 1, 2019. Amendment 3 did not change the due date of the existing end of term fees of $0.05 million which remained due on February 1, 2018. Upon signing Amendment 3, the Company did not draw any of the additional amounts available under the amended debt facility and no amounts have been subsequently drawn under the facility. The Company has until September 3, 2018 to draw the additional amounts.

Amendment 4 to loan agreement

In July 2017, the Company signed Amendment 4 to the Loan Agreement (Amendment 4). Amendment 4 instituted a cap of 10% with respects to the “Term Loan Interest Rate”.

Amendment 5 to loan agreement

In August 2018, the Company signed Amendment 5 to the Loan Agreement (Amendment 5). Amendment 5 instituted a 2018 End of Term Charge of $0.08 million. Additionally, the Term Loan Maturity Date was amended to be extended until March 1, 2020. Amendment 5 additionally, changed the due date of the End of Term Charge to, the earlier of (i) the Term Loan Maturity Date, (ii) the date that Borrower prepays the outstanding Secured Obligations or (iii) the date that the Secured Obligations become due and payable. The Company incurred a cost of $0.05 million in relation to the execution of Amendment 5. In connection with the extension of the due date of the Loan, the deferral of principal payments (Amendment 3) was further deferred until the new Term Loan Maturity Date.

Amendment 6 to loan agreement

In October 2018, we signed Amendment 6 to the Loan agreement, which amends the Loan Agreement’s collateral clause to exclude the $1 million certificate of deposit associated with the lease on our new headquarters in Billerica, MA.

End of term charges related to the facility of $0.5 million, and principal payments of $1.4 million were paid during the fiscal year ended December 31, 2018. Under the terms of the August 2018 amended agreement, principal payments were delayed until March 2020. The Company accounted for the August 2018 amendment as a modification as it was determined that no material change occurred as a result of the modification. The Company voluntarily made principal payments in the months of March, April, and May, 2018. No principal payments were made in June, July or August, 2018. Under the amended Loan Agreement, the remaining outstanding principal will be paid upon maturity of the note in March 2020. As of December 31, 2018, the remaining loan balance is classified as a long term liability since all principal payments are due greater than twelve months after the balance sheet date.

Debt payment obligations due based on principal payments are as follows (in thousands):


Years ending December 31:
2019	$	0
2020		7,763
	$	7,763

The balance sheet contains $0.1 million of unamortized debt issuance costs which nets the Long Term Debt balance to $7.6 million. Non-cash interest expense related to debt discount amortization and accretion of end of term fees was $0.2 million, $0.2 million, and $0.4 million for the year ended December 31, 2018, 2017, and 2016, respectively.

The Company assessed all terms and features of the Loan Agreement and the subsequent amendments in order to identify any potential embedded features that would require bifurcation. As part of this analysis, the Company assessed the economic characteristics and risks of the debt. The Company determined that all features of the Loan Agreement and the subsequent amendments are either clearly and closely associated with a debt host or have a de minimis fair value and, as such, do not require separate accounting as a derivative liability. The Company assessed each amendment under ASC 470‑50 and concluded that all of the amendments constituted modifications. In this analysis, consideration was given to the fact that Amendments 4, 5, and 6 were executed within one year of each other. The Company also assessed whether the amendments represented a troubled debt restructuring and concluded they did not. The Company accounted for each of the amendments to the Loan Agreement as a modification of its debt and the unamortized discount and issuance costs related to the prior debt are amortized over the modified term of the new debt.

The Loan Agreement and the subsequent amendments contain negative covenants restricting the Company’s activities, including limitations on dispositions, mergers or acquisitions, incurring indebtedness or liens, paying dividends or making investments and certain other business transactions. There are no financial covenants associated with the Loan Agreement and the subsequent amendments. The obligations under the Loan Agreement and subsequent amendments are subject to acceleration upon the occurrence of specified events of default, including a material adverse change in the Company’s business, operations or financial or other condition. The Company has determined that the risk of subjective acceleration under the material adverse events clause is not probable and therefore has classified the outstanding principal in current and long-term liabilities based on scheduled principal payments.