5. Debt and Related Warrants

Prior Facilities

In December 2010, the Company executed a Loan and Security Agreement with Silicon Valley Bank (“SVB Credit Facility”). The SVB Credit Facility included a $2.0 million term loan and a $2.0 million revolving line of credit. The term loan had a term of four years and the line of credit had a term of two years.

In connection with the SVB Credit Facility, the Company issued to Silicon Valley Bank a warrant to purchase 3,076 shares of the Company’s Series A redeemable convertible preferred stock at an exercise price of $26.00 per share. The warrant could be exercised at any time and would expire, if not exercised, on December 14, 2019. At the date of issuance, the Company recorded the warrant as a debt discount of $63,000 and as a liability on the balance sheet at its fair value. At the date of the IPO of the Company’s common stock, the warrant was converted into a warrant to purchase 3,076 shares of the Company’s common stock. The warrant was remeasured to its fair value of $1,600 and the carrying value of the warrant of $1,600 was reclassified to additional paid in capital during the year ended December 31, 2016.

In February 2014, the Company executed an Amended and Restated Loan and Security Agreement (“Amended SVB Credit Facility”). The Amended SVB Credit Facility included a $4.0 million term loan and a $4.0 million revolving line of credit. The term loan provided for interest at a floating rate equal to the greater of (a) 5% or (b) the prime rate plus 3.75%, and had a term of four years. The revolving line of credit loan provided for interest at a floating rate equal to the greater of (a) 5% or (b) the prime rate plus 1.75% and had a term of two years.

In connection with the Amended SVB Credit Facility, the Company issued to Silicon Valley Bank a warrant to purchase 6,153 shares of the Company’s Series B redeemable convertible preferred stock at an exercise price of $26.00 per share. The warrant can be exercised at any time and expires 10 years after the date of issuance. The Company recorded the warrant as a debt discount and as a liability on the balance sheet at its fair value of $106,000 on the date of issuance using the Black-Scholes option-pricing model. At the date of the IPO of the Company’s common stock, the warrant was converted into a warrant to purchase 6,153 shares of the Company’s common stock. The warrant was remeasured to its fair value of $14,900 and carrying value of the warrant of $14,900 was reclassified to additional paid in capital during the year ended December 31, 2016.

In June 2015, the outstanding principal balance on the Amended SVB Credit Facility of $2.8 million was repaid, at which time the unamortized balance of the debt discount of $114,000 and a prepayment penalty of $20,000 were recognized as interest expense.

2015 Credit Facility

In June 2015, the Company executed a Loan and Security Agreement with Ares Venture Finance (“2015 Credit Facility”) comprising an $8.0 million term loan and a $4.0 million revolving loan. The term loan provides for interest at a floating rate equal to the greater of (a) 8.75% or (b) LIBOR plus 7.75% and has a term of four years. The term loan is payable in 15 monthly installments of interest only and 33 payments of principal and interest with an end-of-term fee of $180,000 due upon maturity. The revolving loan provides for interest at a floating rate equal to the prime rate plus 3.75% and has a term of two years. The Company may draw upon the loan facility for working capital purposes as required depending upon accounts receivable balances and other required conditions. In January 2016, the Company borrowed $1.5 million from the revolving loan. A portion of the proceeds was used to pay off the outstanding balance on the Amended SVB 2014 Credit Facility.

Security for the 2015 Credit Facility includes all of the Company’s assets except for leased equipment. The 2015 Credit Facility contains customary covenants restricting the Company’s activities, including limitations on its ability to sell assets, engage in mergers and acquisitions, 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 dividends with respect to its capital stock. The Company was in compliance with all covenants at December 31, 2016 and 2015.

In connection with the 2015 Credit Facility, the Company issued to Ares Venture Finance a warrant to purchase 18,461 shares of the Company’s Series B redeemable convertible preferred stock at an exercise price of $26.00 per share. The warrant can be exercised at any time and expires 10 years after the date of issuance. The Company recorded the warrant as a debt discount and as a liability on the balance sheet at its fair value of $307,000 on the date of issuance using the Black-Scholes option-pricing model. The fair value of the warrant was $307,000 at December 31, 2015. At the date of the IPO of the Company’s common stock, the warrant was converted into a warrant to purchase 18,461 shares of the Company’s common stock. The warrant was remeasured to its fair value of $48,900 and the carrying value of the warrant of $48,900 was reclassified to additional paid-in capital during the year ended December 31, 2016.

The carrying value of the Company’s 2015 Credit Facility at December 31, 2016, was as follows (in thousands):


	Current		Long-Term
	Portion		debt		Total
Debt, including end of term fee	$	4,054	$	4,301	$	8,355
Less:
Discount attributable to warrants, end of term fee and debt issuance costs		(177)		(83)		(260)
Net carrying value of debt	$	3,877	$	4,218	$	8,095

The carrying value of the Company’s 2015 Credit Facility at December 31, 2015, was as follows (in thousands):


	Current		Long-Term
	Portion		debt		Total
Debt, including end of term fee	$	970	$	7,210	$	8,180
Less:
Discount attributable to warrants, end of term fee and debt issuance cost		—		(471)		(471)
Net carrying value of debt	$	970	$	6,739	$	7,709

The table below shows the principal repayments due under the 2015 Credit Facility as of December 31, 2016 (in thousands):


	Principal Repayment
	as of December 31,
2017	$	4,054
2018		2,909
2019		1,392
Total principal repayments	$	8,355

Capital Lease Obligations

The Company leases certain equipment under capital lease obligations expiring in March 2017. The balance of the capital lease obligations was $7,000 and $205,000 at December 31, 2016 and 2015, respectively.

Property and equipment under capital leases amounted to $440,000 and $431,000 at December 31, 2016 and 2015, respectively. Accumulated depreciation and amortization on these assets was $433,000 and $256,000 at December 31, 2016 and 2015, respectively.