6.Notes Payable

On August 27, 2014, the Company entered into a credit facility with MidCap Financial Trust, Flexpoint MCLS SPV LLC and Square 1 Bank, which was subsequently amended in March and December 2015 (as amended, the “Credit Facility”). The Credit Facility provided for maximum borrowings of $25.0 million. The Company received total proceeds of $10.0 million under term loans and the remaining amounts available for borrowing under this arrangement expired unused as of July 31, 2015. All amounts outstanding under the Credit Facility are due on October 1, 2018 and are collateralized by substantially all of the Company’s personal property, other than its intellectual property.

Amounts due under the Credit Facility bear interest at an annual rate of 7.49%. In addition, a final payment equal to 3.48% of any amounts drawn under the Credit Facility is due upon the earlier of the maturity date, acceleration of the term loans or prepayment of all or part of the term loans. The final payment is being accrued as additional interest expense using the effective-interest method from the date of issuance through the maturity date and is recorded within other current liabilities. In the event of prepayment, the Company is obligated to pay 1% to 3% of the amount of the outstanding principal depending upon the timing of the prepayment. As of June 30, 2018, the Company would be obligated to pay 1% of the amount of the outstanding principal in the event of a prepayment. The effective interest rate as of June 30, 2018 was 11.2%.

There are no financial covenants associated with the Credit Facility; however, there are negative covenants restricting the Company’s activities, including limitations on asset dispositions, mergers or acquisitions; encumbering or granting a security interest in its intellectual property; incurring indebtedness or liens; paying dividends; making certain investments; and entering into certain other business transactions.

Upon the occurrence and continuation of an event of default, the lenders have the right to exercise certain remedies against the Company and the collateral securing the loans under the Credit Facility, including cash. Events of default include, among other things, failure to pay amounts due under the Credit Facility, insolvency, the occurrence of a material adverse event, which includes a material adverse change in the business, operations or conditions (financial or otherwise) of the Company or a material impairment of the prospect of repayment of any portion of the obligations, the occurrence of any default under certain other indebtedness and a final judgment against the Company in an amount greater than $250,000. The occurrence of a material adverse event could result in acceleration of the payment of the debt. At June 30, 2018 and December 31, 2017, the maturity date of the debt was within twelve months and therefore all debt was classified as current. Following the occurrence and during the continuance of an event of default, borrowings under the Credit Facility shall bear interest at a rate per annum, which is five hundred basis points, or 5.00%, above the rate that is otherwise applicable.

The Company assessed all terms and features of the Credit Facility in order to identify any potential embedded features that would require bifurcation or any beneficial conversion features. As part of this analysis, the Company assessed the economic characteristics and risks of the Credit Facility, including put and call features. The Company determined that all features of the Credit Facility were clearly and closely associated with a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company’s financial statements. The Company reassesses the features on a quarterly basis to determine if they require separate accounting.

Estimated future principal payments at June 30, 2018 are as follows (in thousands):

Period Ending December 31, 2018	Amount
Total	$	833
Less: discount for warrants and costs paid to lenders	(2		)
Less: current portion	(831		)

Note payable, net of current portion and discount	$	—

The Company recognized $33 thousand and $0.1 million of interest expense related to the Credit Facility in the three-month periods ending June 30, 2018 and 2017, respectively. The Company recognized $0.1 million and $0.3 million of interest expense related to the Credit Facility in the six-month periods ending June 30, 2018 and 2017, respectively.