|12 Months Ended|
Dec. 31, 2016
|Debt Disclosure [Abstract]|
9. Long-Term Debt
On December 30, 2016, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) that provided up to $10,000 in total borrowings available for draw in two tranches of $7,000 (the “Term A Loan”) and $3,000 (the “Term B Loan”, and together with the Term A Loan, the “Term Loans”), respectively. The Term A Loan was disbursed to the Company on December 30, 2016. If the Company receives net cash proceeds of at least $15,000 in connection with the sale or issuance of its equity securities, including in connection with the exercise of warrants, prior to December 31, 2017, the Company may request on or prior to December 31, 2017, the Term B Loan so long as no event of default has occurred. Any amounts borrowed and repaid may not be reborrowed. The Loan Agreement creates a first priority security interest with respect to substantially all assets of the Company, including proceeds of intellectual property, but expressly excluding intellectual property itself.
Pursuant to the Loan Agreement, the proceeds from the Term Loans may only be used for working capital purposes and to fund general business requirements. The Term Loans will bear interest on the outstanding daily balance at a floating per annum rate equal to the 30 day U.S. LIBOR rate plus 5.41%.
The Company is required to pay accrued interest on the Term A Loan on the first day of each month through and including January 1, 2018 (or July 1, 2018, if the Term B Loan is drawn upon). Commencing on February 1, 2018 (or August 1, 2018, if the Term B Loan is drawn upon), the Company is required make equal monthly payments of principal, together with accrued and unpaid interest. The principal balance of the Term Loans amortizes ratably over 36 months (or 30 months, if the Term B Loan is drawn upon). The maturity of the Term Loans is January 1, 2021, at which time all unpaid principal and accrued and unpaid interest shall be due and payable in full. In addition, a final payment equal to 3.5% of the original principal amount will be due on the maturity date.
The Company may elect to prepay a Term Loan at any time, in whole but not in part. If the Company prepays a Term Loan prior to December 30, 2017, it will owe a prepayment fee equal to 1.0% of the principal amount of such prepaid Term Loan. The prepayment fee is also payable in connection with any acceleration of a Term Loan prior to December 30, 2017 following a default by the Company. In addition, the Company is required to pay a fee in an amount equal to 3.5% of each Term Loan upon the earlier to occur of (a) acceleration of such Term Loan following a default by the Company, (b) voluntary prepayment of such Term Loan by the Company and (c) the maturity of such Term Loan.
The Loan Agreement includes funding conditions, representations and warranties and covenants customary to similar credit facilities. In addition, the Company agreed to a liquidity covenant requiring that it maintain unrestricted cash and cash equivalents in accounts at Lender or subject to control agreements in favor of Lender in an amount equal to at least three months of “Monthly Cash Burn,” which is the Company’s average monthly net income (loss) for the trailing six-month period plus certain expenses and plus the average monthly principal due and payable on interest-bearing liabilities in the immediately succeeding three-month period. Such amount was determined to be $6,206 as of January 31, 2017, the most current determination, with the amount subject to change on a month-to-month basis. At December 31, 2016, with cash on hand of $16,846 we were in compliance with this and all other covenants.
Events of default which may cause repayment of the Term Loans to be accelerated include, among other customary events of default, (1) non-payment of any obligation when due, (2) the Company’s failure to comply with its affirmative and negative covenants, (3) the Company’s failure to perform any other obligation required under the Loan Agreement and to cure such default within a 30 days after becoming aware of such failure, (4) the occurrence of a Material Adverse Effect, (5) the attachment or seizure of a material portion of the Company’s assets if such attachment or seizure is not released, discharged or rescinded within 10 days, (6) bankruptcy or insolvency of the Company, (7) default by the Company under any agreement (i) resulting in a right by a third party to accelerate indebtedness in an amount in excess of $250 or (ii) that would reasonably be expected to have a Material Adverse Effect, (8) entry of a final, uninsured judgment or judgments against the Company for the payment of money in an amount, individually or in the aggregate, of at least $250, or (9) any material misrepresentation or material misstatement with respect to any warranty or representation set forth in the Loan Agreement.
On December 30, 2016, pursuant to the Loan Agreement, the Company entered into a Success Fee Agreement with the Lender under which the Company agreed to pay the Lender a $250 success fee upon the first to occur of any of the following events: (a) a sale or other disposition by the Company of all or substantially all of its assets; (b) a merger or consolidation of the Company into or with another person or entity, where the holders of the Company’s outstanding voting equity securities immediately prior to such merger or consolidation hold less than a majority of the issued and outstanding voting equity securities of the successor or surviving person or entity immediately following the consummation of such merger or consolidation; or (c) the closing price per share for the Company’s common stock being $8.00 or more for five successive business days. The estimated fair value of the success fee was determined using the Binomial Lattice Model and was recorded as a discount to the debt obligation. The fair value of the contingent success fee is re-measured each reporting period with any adjustments in fair value being recognized in loss from operations. The success fee is classified as a liability on the consolidated balance sheets. At December 31, 2016, the carrying value of the contingent success fee liability was $116.
The final payment fee, debt issuance costs, and fair value of the success fee combined with the stated interest result in an effective interest rate of 6.27%. The final payment fee and debt issuance costs will be accreted and amortized, respectively, to interest expense using the effective interest method over the life of the loan.
The following table presents scheduled principal payments of our long-term debt as of December 31, 2016:
The entire disclosure for long-term debt.
Reference 1: http://www.xbrl.org/2003/role/presentationRef