Quarterly report pursuant to Section 13 or 15(d) 03-31-2016

Debt

v3.4.0.3
Debt
3 Months Ended
Mar. 31, 2016
Debt Disclosure [Abstract]  
Debt

7. Debt

 

Hercules Term Loan

 

On June 30, 2014, the Company entered into a Loan and Security Agreement with Hercules which provided the Company with a $20 million term loan. The Hercules Term Loan matures on January 1, 2018. The Hercules Term Loan included a $200,000 closing fee, which was paid to Hercules on the closing date of the loan. The closing fee was recorded as a debt discount and is being amortized to interest expense over the life of the loan. The Hercules Term Loan also includes a non-refundable final payment fee of $1.7 million. The final payment fee is being accrued and recorded to interest expense over the life of the loan. The Hercules Term Loan bears interest at the rate of the greater of either (i) the prime rate plus 9.2%, and (ii) 12.5%, and was 12.7% at March 31, 2016. Interest accrues from the closing date of the loan and interest payments are due monthly. Principal payments commenced August 1, 2015 and are to be made in 30 equal installments of approximately $700,000, with the remainder due at maturity. The Company’s obligations to Hercules are secured by a first priority security interest in substantially all of its assets, including intellectual property. The Hercules Term Loan contains certain covenants related to restrictions on payments to certain Company affiliates and financial reporting requirements.

 

On September 8, 2015, the Company entered into a Consent and First Amendment to Loan and Security Agreement (the “Amendment”) with Hercules. The Amendment modified the liquidity covenant to reduce the minimum cash balance required by $500,000 for every $1.0 million paid in principal to a minimum of $2.5 million. The minimum cash and cash equivalents balance required to maintain compliance with the minimum liquidity covenant at March 31, 2016 was $7.0 million. Although the Company was in compliance with the liquidity covenant at March 31, 2016, the Company anticipates that it will be non-compliant with the liquidity covenant early in the third quarter of 2016 if additional financing is not obtained or the loan is not restructured, and has therefore classified the entire obligation as a current liability.

 

See Note 11. Subsequent Events for further discussion with respect to the assignment of $3.0 million of the principal balance of the Hercules Term Loan to Riverside Merchant Partners, LLC (“Riverside”) and the subsequent agreement between the Company and Riverside to exchange the $3.0 million of the Hercules Term Loan held by Riverside for subordinated convertible promissory notes in the aggregate principal amount of $3.0 million.

 

Magna Note

 

In August 2014, the Company entered into a Securities Purchase Agreement with Magna pursuant to which the Company sold to Magna an unsecured promissory note with an aggregate principal amount of $3.5 million (the “Magna Note”). The outstanding principal amount of the Magna Note was $763,000 at March 31, 2016. The Magna Note matures on August 11, 2016, and accrues interest at an annual rate of 6.0%.

 

Outstanding long-term debt consisted of the following (in thousands):

 

    March 31, 2016     December 31, 2015  
    Outstanding Principal     Unamortized Discount and Debt Issuance Costs     Net Carrying Amount     Outstanding Principal     Unamortized Discount and Debt Issuance Costs     Net Carrying Amount  
Hercules Term Loan     15,218       (1,186)       14,032       17,051       (1,420)       15,631  
Magna Note     763       (10)       753       763       (29)       734  
Total debt     15,981       (1,196)       14,785       17,814       (1,449)       16,365  
Less: Current portion     (15,981)       1,196       (14,785)       (17,814)       1,449       (16,365)  
Long-term debt   $ -     $ -     $ -     $ -     $ -     $ -  

 

The following summarizes by year the future principal payments as of March 31, 2016 (in thousands):

 

Years Ending December 31,   Hercules Term
Loan
    Magna
Note
    Total  
2016   $ 5,787     $ 763     $ 6,550  
2017     8,643       -       8,643  
2018     788       -       788  
Total future principal payments   $ 15,218     $ 763     $ 15,981