Related-Party Convertible Notes

6 Months Ended

Jun. 30, 2014

Related Party Transactions [Abstract]

Related-Party Convertible Notes

8. Related-Party Convertible Notes

On October 22, 2013, the Company entered into a convertible note purchase agreement with a related party investor for the issuance and sale of up to an aggregate principal amount of $5.0 million of convertible notes (2013 Notes). In each of January 2014 and April 2014, the Company borrowed an aggregate principal amount of $1.0 million of 2013 Notes.

The 2013 Notes had a stated maturity date of December 31, 2016 and accrued interest at a rate of 5% per year. The 2013 Notes and any accrued and unpaid interest were automatically convertible into equity securities sold in the next qualified round of financing occurring prior to the maturity date, at a conversion price equal to 90% of the original issuance price of such equity securities sold in such next round of financing.

The difference between the fair value of the securities into which the debt was convertible and the effective conversion price on the borrowing date represents a beneficial conversion feature. In connection with the January 2014 and April 2014 borrowings, the Company recorded the fair value of the beneficial conversion feature of $1.0 million and $1.0 million, respectively, by allocating a portion of the proceeds to additional paid-in capital, resulting in a discount on the convertible instrument, to be amortized over the repayment period using the effective interest method.

In April 2014, the Company completed a Series B convertible preferred stock financing (refer to Note 9), pursuant to which the outstanding principal amount on the 2013 Notes converted into 295,115 shares of Series B convertible preferred stock at a conversion price of $6.78, which is equal to 90% of the original issuance price of $7.53 per share. At the time of the conversion, the Company recorded a $0.2 million loss on extinguishment of related-party convertible notes in the condensed consolidated statements of operations and comprehensive loss and a repurchase of beneficial conversion feature of $2.0 million as credit to additional paid-in capital.

At June 30, 2014, there are no outstanding convertible notes recorded in our condensed consolidated balance sheet.