7. Debt

Concurrent with the closing of the IPO on August 1, 2016, the Company’s Senior Convertible Term Loan and Second Lien Convert converted into 19,034,467 shares of common stock.

The Company is a party to one credit agreement in the following amount (in thousands):



	December 31,
	2017		2016

Secured term debt due June 17, 2018		34,620		34,620

Total debt before fees and debt discount/premium		34,620		34,620
Less: Deferred financing costs		(228)		(737)
Debt discount		(1,030)		(3,306)
Add: Debt premium		345		—
Total debt payable	$	33,707	$	30,577

Debt payable, current portion	$	33,707	$	1,900
Debt payable, long-term	$	—	$	28,677

Secured Term Debt

August 2015 Secured Term Debt

In August 2015, the Company entered into a secured term loan in the amount of $35.0 million with two lenders (“2015 Credit Agreement”). The interest rate on the loan is LIBOR plus 9.375% with a 1% floor. The Company incurred and paid a $788,000 commitment fee in connection with the loan that will be amortized to interest expense over the term of the agreement. The basic terms of the loan required monthly payments of interest only through the first anniversary date of the loan and require the Company to maintain certain financial covenants requiring the Company to maintain a minimum liquidity amount and minimum revenue levels beginning after June 30, 2016 through August 1, 2016, the date the Company consummated its IPO. Beginning on the first anniversary date of the loan, the Company is required to make monthly principal payments in the amount of $380,000. Any outstanding balance of the loan and accrued interest is to be repaid on June 17, 2018. The secured term loan is collateralized by a first priority perfected security interest in all the tangible and intangible property of the Company.

In conjunction with the 2015 Credit Agreement, warrants to purchase $6.3 million of Class A units were issued to two lenders, of which $5.4 million was recorded as a debt discount and $0.9 million was recorded as loss on extinguishment of debt (Note 8). The debt discount is being amortized over the life of the outstanding term loan using the effective interest method.

Deferred financing costs of $1.3 million were recognized in recording the 2015 Credit Agreement and will be amortized to interest expense over the three year term of the agreement. Additionally, a fee paid to one existing lender of $113,000 was charged to loss on extinguishment of debt in accordance with ASC 470. There was also $1.5 million of debt discount and $390,000 of deferred financing cost write‑offs charged to loss on extinguishment of debt in accordance with ASC 470 in connection with this transaction. Unamortized deferred financing costs were $0.2 million and $0.7 million at December 31, 2017 and 2016, respectively. Approximately $0.5 million, $0.4 million and $0.4 million were charged to interest expense during the years ended December 31, 2017, 2016 and 2015, respectively.

The Company entered into a third waiver agreement to the 2015 Credit Agreement in September 2016 to negotiate the amendment and restatement of certain covenants of the Company contained in the 2015 Credit Agreement. In connection with such negotiation, the lenders under the 2015 Credit Agreement had agreed to refrain from exercising certain rights under the 2015 Credit Agreement, including the declaration of a default and to forbear from acceleration of any repayment rights with respect to existing covenants until the parties have consummated the amendment and restatement of such provisions. In addition, certain payments required to be made under the 2015 Credit Agreement had been deferred while the parties negotiated the amendment. The parties executed a second amendment to the 2015 Credit Agreement in November 2016 whereby the Company deferred further principal payments owed under the 2015 Credit Agreement in the amount of $380,000 per month until August 31, 2017. Additionally, the parties amended various clinical development milestones and added a covenant pursuant to which the Company was required to raise $40.0 million of additional equity capital by the end of the second quarter of 2017. All other material terms of the 2015 Credit Agreement, including the maturity date, remain the same.

The Company entered into a fourth waiver agreement to the 2015 Credit Agreement in March 2017 under which the lenders under the 2015 Credit Agreement agreed to refrain from exercising certain rights under the 2015 Credit Agreement, including the declaration of a default and to forbear from acceleration of any repayment rights with respect to existing covenants. The report and opinion of the Company’s independent registered public accounting firm, BDO USA, LLP, contained an explanatory paragraph regarding the Company’s ability to continue as a going concern, which was an event of default under the 2015 Credit Agreement.

On March 31, 2017, the Company entered into the Third Amendment. Pursuant to this amendment, principal payments owed under the 2015 Credit Agreement, in the amount of $380,000 per month, were deferred until January 31, 2018. Additionally, the parties amended a future capital raising covenant by extending the time period by which the Company was required to raise the remaining $17.0 million of capital by six months, from June 30, 2017 to December 31, 2017, which was satisfied in September 2017. All other material terms of the 2015 Credit Agreement, including the maturity date, remain the same. The clinical development milestone was deemed satisfied in a letter agreement entered into on December 22, 2017 with a majority of lenders under our 2015 Credit Agreement. As of the date hereof, the Company is not in default under the terms of the 2015 Credit Agreement.

The Third Amendment also amended certain terms of the warrants to purchase an aggregate of 617,651 shares of the Company’s common stock issued in connection with the 2015 Credit Agreement (the “2015 Warrants”). Pursuant to the Third Amendment, the warrants may now only be exercised for cash and the exercise price was reduced from $10.20 per share to $4.50 per share. The redemption feature in the 2015 Warrants was also amended such that the warrant holder may only demand a redemption of the 2015 Warrants upon the occurrence of, and during the continuance of, an event of default. Prior to this amendment, the warrant could be redeemed by the warrant holder at any time after the 51st month. As amended, if these warrants are exercised, the Company will receive approximately $2.8 million in proceeds in the aggregate.

As a result of the Third Amendment, $0.9 million was recorded as a debt premium at March 31, 2017, inclusive of the fair value of the warrant modification utilizing a Black-Scholes calculation, and will be amortized to interest expense over the remaining term of the agreement as the amendment was deemed to be a modification in accordance with ASC 470 (Note 8). Approximately $0.6 million was recorded to interest expense during the year ended December 31, 2017.

The Company entered into a fifth waiver agreement to the 2015 Credit Agreement in March 2018 under which the lenders under the 2015 Credit Agreement agreed to refrain from exercising certain rights under the 2015 Credit Agreement, including the declaration of a default and to forbear from acceleration of any repayment rights with respect to existing covenants. The report and opinion of the Company’s independent registered public accounting firm, BDO USA, LLP, contains an explanatory paragraph regarding the Company’s ability to continue as a going concern, which is an event of default under the 2015 Credit Agreement.

The minimum payments required on the outstanding balances of the 2015 Credit Agreement at December 31, 2017 are (in thousands):



	2015 Credit Agreement
2018	$	34,620
	$	34,620

The following table provides components of interest expense and other related financing costs (in thousands):



	Years Ended
	December 31,
	2017		2016		2015
Interest expense and other financing costs	$	3,720	$	3,782	$	7,817
Interest expense - beneficial conversion feature		—		45,915		—
Interest paid-in kind		—		14,695		11,434
Write-off of deferred financing costs and debt discount		—		3,820		2,752
Amortization of deferred financing costs, debt discount and debt premium		2,242		4,422		5,157
Interest expense	$	5,962	$	72,634	$	27,160