Subsequent events |
6 Months Ended | ||||||||||
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Jun. 30, 2017 | |||||||||||
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8. Subsequent events
On July 27, 2017, we entered into a venture loan and security agreement (the “Loan Agreement”) with Horizon Technology Finance Corporation (the “Horizon”), which provides for up to $10,000,000 in loans, including an initial loan in the amount of $7,000,000 extended upon signing of the Loan Agreement. An additional $3,000,000 loan is subject to our achievement of the following milestones on or prior to March 31, 2018:
Repayment of the loans is on an interest-only basis through December 31, 2018, followed by monthly payments of principal and accrued interest for the balance of the four-year term. The loans bear interest at a floating coupon rate of one-month LIBOR (floor of 1.10%) plus 8.40%. A final payment equal to 5.0% of each loan tranche will be due on the scheduled maturity date for such loan. In addition, if we repay all or a portion of the loan prior to the applicable maturity date, we will pay Horizon a prepayment penalty fee, based on a percentage of the then outstanding principal balance, equal to 4% if the prepayment occurs during the interest-only payment period, 3% if the prepayment occurs during the 12 months following such period, and 2% thereafter.
Our obligations under the Loan Agreement are secured by a first priority security interest in all of our assets, with the exception of our intellectual property. We agreed not to pledge or otherwise encumber our intellectual property assets, subject to certain exceptions. The Loan Agreement includes customary affirmative and restrictive covenants, excluding any covenants to attain or maintain certain financial metrics, and also includes customary events of default, including for payment failures, breaches of covenants, change of control and material adverse changes. Upon the occurrence of an event of default and following any applicable cure periods, a default interest rate of an additional 5% may be applied to the outstanding loan balances, and Horizon may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Loan Agreement. In connection with the Loan Agreement, we issued Horizon warrants to purchase an aggregate of 280,612 shares of common stock (the “Lender Warrants”). The per share exercise price of the Lender Warrants is the lower of (i) $1.96 or (ii) the price per share of any securities that may be issued in an equity financing during the next 18 months. We issued Horizon an additional warrant that will only become exercisable upon the funding of the second tranche of the loan, the number of shares and exercise price to be calculated at such time. We are required to file a registration statement within the next 90 days covering the resale of the shares underlying the Lender Warrants. As a result of anti-dilution provisions contained in the outstanding Series A warrants, the exercise price of such warrants was reduced from $4.89 to $4.85 per share.
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