Warrants

6 Months Ended

Jun. 30, 2018

Credit Agreement

On August 30, 2016, the Company entered into a one-year credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”) providing for a term loan in the principal amount of $5,000 (the “Loan”) and borrowed the full $5,000 available under the Credit Agreement. In connection with the agreement, the Company issued warrants to two members of the Company’s Board of Directors in exchange for providing a guarantee on the debt. The Credit Agreement was fully satisfied with a principal repayment to Wells Fargo of $5,000 on August 31, 2017.

The Company recognized interest expense of $362 and $667 during the three and six months ended June 30, 2017. The Company recognized $296 and $569 related to the accretion of the debt discount during the three and six months ended June 30, 2017.

Guarantor and Co-Guarantor Warrants

In connection with entering into the Credit Agreement, the Company issued warrants to purchase common shares to two of the Company’s directors in connection with a guarantee of its obligations under the agreement. The Company previously classified the warrants as a liability on its consolidated balance sheet because each warrant represented a freestanding financial instrument that was not indexed to the Company’s own shares. The warrant liability was initially recorded at fair value upon entering into the credit agreement and was subsequently remeasured to fair value at each reporting date. Changes in the fair value of the warrant liability was recognized as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss.

On January 26, 2018, the anti-dilution price protection provisions contained within the warrants issued to each of the guarantor and co-guarantor of the Credit Agreement expired. Both the guarantor and co-guarantor are members of the Company’s Board of Directors.

Changes in the fair value of the warrant liability, until expiration of the anti-dilution price protection provisions, are recognized as a component of other income (expense), net in the Company’s consolidated statement of operations and comprehensive loss. Upon expiration of the provision, the Company discontinued classification of these warrants as a liability, and has accordingly reclassified the fair value of $5,203 to additional paid-in capital within shareholders’ equity.

The fair value of the warrant liability was $4,021 at December 31, 2017. The following table provides income (expense) related to the warrant liability which the Company records net within other income (expense) in the condensed consolidated statements of operations:



	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018			2017
Income (expense) from change in fair value of warrant liability	$	—	$	(2,629	)	$	(1,182	)	$	(3,083	)