Loan). On June 15, 2015, following the completion of the Merger, the Company signed a joinder agreement with Hercules making it a co-borrower
under the LSA. The entire Term Loan was funded on June 16, 2015. The Term Loan is secured by substantially all of the Companys assets, excluding intellectual property.
The Term Loan bears interest at a floating annual rate equal to the greater of (i) 9.50% and (ii) the sum of (a) the prime rate as reported by
The Wall Street Journal minus 3.25% plus (b) 9.50%. The Company is required to make interest payments in cash on the first business day of each month, beginning on July 1, 2015. The Term Loan interest rate was 10.75% and 10.00% at
December 31, 2017 and 2016, respectively. On August 1, 2016, the Company began making monthly payments on the first business day of each month consisting of principal and interest based upon a
30-month amortization schedule, and any unpaid principal and interest is due on the maturity date of July 1, 2018. Upon repayment of the Term Loan, the Company is also required to pay an end of term
charge to the lenders equal to $245. As of December 31, 2017 the Company has accrued $225 of the total $245 end of term charge, which is being accrued over the term of the loan to interest expense.
The Company may elect to prepay all, but not less than all, of the outstanding principal balance of the Term Loan, subject to a prepayment fee of 1% to 3%,
depending on the date of repayment. Contingent on the occurrence of several events, including that the Companys closing stock price exceed $11.73 per share for the seven days preceding a payment date, the Company may elect to pay, in whole or
in part, any regularly scheduled installment of principal up to an aggregate maximum amount of $1,000 by converting a portion of the principal into shares of the Companys common stock at a price of $11.73 per share. Hercules may elect to
receive payments in the Company Common Stock by requiring the Company to affect a conversion option whereby Hercules can elect to receive a principal installment payment in shares of the Company Common Stock based on a price of $11.73 per share,
subject to an aggregate maximum principal amount of $1,000.
The Company determined that the Companys provisions allowing conversion of all or a
portion of the LSA contained a beneficial conversion feature (BCF). The BCF is contingent upon the occurrence of certain events and as such, the Company will not record the BCF until the contingency is resolved. Through December 31,
2017 the contingency was not resolved.
The credit facility includes affirmative and negative covenants. The affirmative covenants include, among others,
covenants requiring the Company to maintain its legal existence and governmental approvals, deliver certain financial reports and maintain insurance coverage. The negative covenants include, among others, restrictions on transferring collateral,
incurring additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other distributions, making investments, creating liens, selling assets, and undergoing a change in control, in each case subject to certain
exceptions. In general, the Term Loan prohibits the Company from (i) repurchasing or redeeming any class of capital stock, including common stock or (ii) declaring or paying any cash dividend or making cash distribution on any class of
capital stock, including common stock. The Company complied with all covenants during the years ended December 31, 2017 and 2016.
In connection with
the making of the term loan the Company agreed that Hercules shall have the right to purchase up to $1,000 of securities, under terms and conditions equal to those afforded to other investors, in the event that the Company conducts a private
placement for $10,000 or more of securities after the closing date.
On June 16, 2015, in connection with the LSA, the Company granted to Hercules a
warrant to purchase 25,150 shares of the Companys common stock at an exercise price of $8.35 per share. The warrants are exercisable in whole or in part any time prior to the expiration date of June 16, 2020. At any point prior to the
expiration of the warrants, Hercules may elect to convert all or a portion of the warrants into Company Common Stock on a net basis. In the event the warrants are not fully exercised and the fair market value of one share of Company Common Stock is
greater than the exercise price of the warrant, upon the expiration date any outstanding warrants will be automatically exercised for shares of Company Common Stock on a net basis.
The LSA includes provisions requiring the embedded interest rate reset upon an event of default and the put option upon an event of default or qualified
change of control each represent an embedded derivative instrument