Debt |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt |
Debt
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. On June 30, 2014, the Company also entered into a Securities Purchase Agreement with Magna pursuant to which the Company sold to Magna an initial unsecured senior convertible note (“Initial Convertible Note”) with an original principal amount of $2.9 million for a purchase price of $2.5 million. Additionally, on August 11, 2014, the Company sold to Magna an additional unsecured senior convertible note (“Additional Convertible Note”) with an original principal amount of $3.5 million for a purchase price of $3.5 million. The Initial Convertible Note and the Additional Convertible Note are collectively referred to as the Magna Convertible Notes.
Hercules 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 Technology 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 7.7%, or (ii) 10.95%. 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 Technology. The Amendment amended certain terms the Hercules Loan and Security Agreement and granted certain consents to the Company relating to the Settlement Agreement with Magna discussed below. The Amendment provides that if the Company prepays its loan from Hercules, it must pay a prepayment charge of 1.5% of the amount being prepaid until September 8, 2016 and thereafter 0.75%. The Amendment also increased the fee the Company must pay to Hercules upon the maturity of the loan or if it is prepaid from $1.5 million to $1.7 million. Further, the annual interest rate on the loan will increase by 1.5% if the Company does not receive gross proceeds of at least $10.0 million from the exercise of the Series B and Series C Warrants discussed in Footnote 8. As part of the Amendment, Hercules also waived and released its event of default notice sent on June 30, 2015. Additionally, the Amendment reduced the Company’s obligation to maintain cash and cash equivalents of not less than $9.0 million to an amount that varies based on the loan amount. The minimum cash requirement is reduced 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 September 30, 2015 was $8.5 million. Although the Company was in compliance with the liquidity covenant at September 30, 2015, the Company anticipates that it will be non-compliant with the liquidity covenant during the fourth quarter of 2015 if additional financing is not obtained, and has therefore classified the entire obligation as a current liability.
As part of the Amendment, the warrant held by Hercules was modified to increase the number of underlying shares to 1,548,387 and decrease the exercise price to $0.47, subject to adjustment. The warrant modification increased the estimated fair value of the warrant by $382,000, which was recorded as a debt discount and an increase in derivative liability. The debt discount is being amortized over the life of the loan.
Magna Convertible Notes
On April 2, 2015, we entered into an Amendment and Exchange Agreement (the “Amendment Agreement”) with Magna. The Amendment Agreement provides for the issuance by the Company to Magna of two new senior convertible notes, one with a maturity date in June 2016 and one with a maturity date in August 2016 (the "June Note", the "August Note," and collectively the “Exchange Convertible Notes”) in exchange for the Initial Convertible Note, the Additional Convertible Note and a warrant issued to Magna ("Magna Warrant") to purchase 568,889 shares of the Company's common stock at an exercise price of $4.65. The exchange resulted in the cancellation of the Initial Convertible Note, Additional Convertible Note and Magna Warrant.
On June 19, 2015, the Company received written notice from Magna that an event of default had occurred with respect to the Exchange Convertible Notes and underlying agreements. On September 8, 2015, the Company entered into a Settlement and Waiver Agreement ("Settlement Agreement") with Magna. Pursuant to the Settlement Agreement, the Company paid Magna $2.5 million from the September 2015 Offering discussed in Footnote 8 to redeem the entire $800,000 of outstanding principal amount and accrued interest of the June Note and to partially redeem $1.4 million principal amount of the August Note and any accrued interest. The Company agreed to pay an additional $1.25 million to partially redeem $1.1 million of the remaining principal amount of the August Note and any accrued interest if the Company receives gross proceeds of $5.0 million from the sale of equity securities and up to another $1.25 million to redeem in full the remaining August Note principal balance and interest if the Company receives up to an additional $5.0 million in gross proceeds. As part of the Settlement Agreement, Magna waived its event of default notice delivered to the Company on June 19, 2015 and its right to convert the August Note into shares of common stock.
The Settlement Agreement was accounted for as a debt extinguishment and the Company recorded a gain on extinguishment of debt of $2.4 million. Since the conversion features of the Exchange Convertible Notes were eliminated, the estimated fair value of the conversion features of $3.5 million was extinguished and included in the calculation of the gain on extinguishment of debt.
The outstanding principal amount of the remaining Magna August Note was $2.1 million at September 30, 2015. The Magna August Note matures on August 11, 2016, and accrues interest at an annual rate of 6.0%.
During the nine months ended September 30, 2015, Magna converted a total of $202,000 of the principal amount of the Convertible Notes into 373,000 shares of common stock. The Company recorded a loss upon extinguishment of $79,000 during the nine months ended September 30, 2015 related to the conversion into shares of common stock.
Outstanding long-term debt consisted of the following (in thousands):
The following summarizes by year the future principal payments on the Hercules Term Loan and the Magna August Noteas of September 30, 2015 (in thousands):
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