Debt

12 Months Ended

Dec. 31, 2019

2017 Term Loan

On September 12, 2017, the Company entered into a term loan facility of up to $21.0 million (the “2017 Term Loan”) with Silicon Valley Bank, a California corporation (“SVB”). The 2017 Term Loan is governed by a loan and security agreement, dated September 12, 2017, between the Company and SVB (the “Loan Agreement”). The 2017 Term Loan was funded in full on September 13, 2017 (the “Funding Date”).

On the Funding Date, the Company entered into a payoff letter with SVB, pursuant to which SVB utilized $10.0 million of the 2017 Term Loan to pay off all outstanding obligations under the 2015 Term Loan. The Company recognized a loss on extinguishment of debt in the amount of $0.7 million during the three months ended September 30, 2017.

The Company incurred less than $0.1 million in debt issuance costs in connection with the closing of the 2017 Term Loan. Debt issuance costs are presented in the consolidated balance sheet as a direct deduction from the associated liability and amortized to interest expense over the term of the related debt.

The 2017 Term Loan will mature on February 1, 2022. Each advance under the 2017 Term Loan accrues interest at a floating per annum rate equal to one-half of one percent above the prime rate (as published in the money rates section of The Wall Street Journal). The 2017 Term Loan provided for interest-only payments monthly until August 31, 2019. On September 1, 2019, the Company began making amortization payments on the Term Loan, which will continue to be payable monthly in equal installments of principal and variable interest to fully amortize the outstanding principal over the remaining term of the loan. The monthly interest is subject to recalculation upon a change in the prime rate. The Company may prepay the 2017 Term Loan in full but not in part provided that the Company (i) provides five business days’ prior written notice to SVB, (ii) pays on the date of such prepayment for all outstanding principal plus accrued and unpaid interest, 1% if prepaid after the second anniversary.

Amounts outstanding during an event of default are payable upon SVB’s demand and shall accrue interest at an additional rate of 4.0% per annum of the past due amount outstanding. The events of default under the Loan Agreement include, but are not limited to, the Company’s failure to make any payments of principal or interest under the Loan Agreement or other transaction documents, the Company’s breach or default in the performance of any covenant under the Loan Agreement or other transaction documents, the occurrence of a material adverse effect, the Company making a false or misleading representation or warranty in any material respect under the Loan Agreement, the Company’s insolvency or bankruptcy, any attachment or judgment on the Company’s assets in excess of approximately $0.3 million, or the occurrence of any default under any agreement or obligation of the Company involving indebtedness in excess of approximately $0.3 million. If an event of default occurs, SVB is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement.

The 2017 Term Loan is secured by a lien on substantially all of the assets of the Company, other than intellectual property, provided that such lien on substantially all assets includes any rights to payments and proceeds from the sale, licensing or disposition of intellectual property. The Company has also granted SVB a negative pledge with respect to its intellectual property.

The 2017 Term Loan does not include any financial covenants. The 2017 Term Loan requires a final payment fee of 5% on the aggregate principal amounts borrowed upon repayment at maturity, on a prepayment date, or upon default. The final payment fee totaling $1.1 million is recorded as a loan discount. Under the 2017 Term Loan, the Company is not required to maintain a minimum cash balance. All deposits in operating, depository and securities accounts are required to be maintained with SVB in an amount equal to the lessor of (i) 100% of the Company's cash balance or (ii) 105% of the dollar amount of the then outstanding obligations. In addition, the 2017 Term Loan contains a subjective acceleration clause whereby in an event of default, an immediate acceleration of repayment occurs if there is a material impairment of the lenders’ lien or the value of the collateral, a material adverse change in the business condition or operations, or a material uncertainty exists that any portion of the loan may not be repaid.

The Company assessed all terms and features of the 2017 Term Loan 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 2017 Term Loan, including any put and call features. The Company determined that all features of the 2017 Term Loan were clearly and closely associated with the debt host and did not require bifurcation as a derivative liability, or the fair value of the embedded feature was immaterial to the Company's consolidated financial statements. The Company reassesses the identified features on a quarterly basis to determine if they require bifurcation.

As of December 31, 2019 and December 31, 2018, the outstanding principal balance under the 2017 Term Loan was $18.2 million and $21.0 million, respectively.

Future minimum principal and interest payments on the 2017 Term Loan as of December 31, 2019 are as follows (in thousands):



2020	9,084
2021	8,716
2022	2,461
Total minimum debt payments	$	20,261
Less: Amount representing interest	(1,011		)
Less: Debt discount and deferred charges	(345		)
Less: Current portion of loan payable	(18,905		)
Loan payable, net of current portion	$	—

All amounts due under the 2017 Term Loan have been classified as a current liability as of December 31, 2019 due to the considerations discussed in Note 1 and the assessment that the material adverse change clause under the 2017 Term Loan is not within the Company's control. The Company has not been notified of an event of default by SVB as of the date of the filing of this Annual Report on Form 10-K.

During the years ended December 31, 2019, 2018 and 2017, the Company recognized $1.5 million, $1.5 million and $1.2 million respectively of interest expense related to the 2017 Term Loan.