Debt | Note 7. Debt The Company has an Amended and Restated Loan and Security Agreement (Amended SVB Agreement) with Silicon Valley Bank (SVB). The Company also had an Amended and Restated Loan and Security Agreement (Wellington Agreement) with Wellington Financial LP (Wellington). The SVB Agreement In 2012, the Company amended and replaced its existing SVB credit facility with an Amended and Restated Loan and Security Agreement (SVB Agreement) consisting of a $7,000,000 revolving line of credit with a maturity date of August 2014 and a $3,000,000 term loan facility. The line of credit carried a variable annual interest rate equal to the greater of prime plus 2.25% or 5.5%. The term loan consisted of an advance of $1,500,000 at the effective date and an additional $1,500,000 advance in March 2013. The term loan carried a variable annual interest rate of prime plus 1.75% and required the Company to make monthly interest only payments for six months. Thereafter, the Company was required to make 30 equal monthly installments of principal and accrued interest, payable at the beginning of each month through the maturity date of August 2015 and March 2016, respectively. All of the Company’s assets have been pledged as collateral to SVB on a first priority, senior basis. In May 2013, in connection with the Wellington Agreement, the Company further amended the SVB Agreement to cancel the $3,000,000 term loan facility and reduce the revolving line of credit from $7,000,000 to $5,000,000. Therefore, the amount then outstanding under the term loan facility of $2,850,000 became due and was repaid. In connection with this SVB amendment, the Company paid SVB fees of $25,000. In January 2014, the SVB agreement was amended to increase the amount available under the revolving line of credit to $8,000,000 and extend the maturity date to August 2015. In October 2014, the Company entered into a Sixth Amendment to the Amended and Restated Loan and Security Agreement as well as a new Mezzanine Loan and Security Agreement (Mezzanine Loan) with SVB. The amendment extended the due date of the $8,000,000 revolving line of credit from August 2015 to August 2016 and allowed for an increase up to $13,000,000 if the Company met certain equity milestones as defined in the amendment. In November 2014, the first equity milestone had been met and therefore the revolving line of credit was increased to $11,000,000. The terms of the amended agreement were not substantially different and therefore the amendment was accounted for as a debt modification. As such, the existing unamortized debt issuance costs were added to the new issuance costs to be amortized over the new remaining term of the debt. The Mezzanine Loan provided for a new $10,000,000 term loan with a fixed interest rate of 9.5%. The payment terms of the term loan require the Company to make monthly interest only payments through the maturity date in October 2017, and a final payment ranging from 2.5% to 7.5% of the aggregate principal balance of the term loan depending on the payment date along with the outstanding principal balance. The Company borrowed $10,000,000 million under such term loan facility in October 2014. In connection with the October 2014 amendment to the SVB Agreement, the Company paid direct fees of $50,000. The Company also issued warrants to purchase 156,250 shares of Series D-1 convertible preferred stock with an exercise price of $7.60. The initial fair value of the Series D-1 warrants was $1,866,000 (see Note 9). Both the cash fees and the initial fair value of the warrants were being amortized as interest expense over the term of the debt. In October 2015, the Company entered into the Amended SVB Agreement. The Amended SVB Agreement amended the Company’s existing revolving line of credit (LOC) with SVB and provided the Company with a term loan (SVB Term Loan) to repay the Company’s existing Mezzanine Loan. The Amended SVB Agreement increased the LOC from $11,000,000 to $15,000,000, and extended the maturity date from August 2016 to October 2018. The LOC carries a variable interest rate equal to Prime plus 1.25% or LIBOR plus 2.5%. As of January 31, 2016, $6,500,000 had been borrowed under the LOC, leaving $8,500,000 available for borrowing. As of January 31, 2017, the interest rate on the LOC was 3.28%. The SVB Term Loan provides for a $10,000,000 term loan with a maturity date of September 2019. The SVB Term Loan carries a variable interest rate of Prime plus 1.25% or LIBOR plus 2.5% and requires quarterly principal payments and monthly interest payments through the maturity date in September 2019. The terms of the SVB Term Loan were substantially different than the Mezzanine Loan and therefore the amendment was accounted for as an extinguishment of the Mezzanine Loan. As such, the SVB Term Loan was recorded at fair value and the existing unamortized debt issuance costs were included in the calculation of any gain or loss on extinguishment. Therefore, the Company recorded a loss on extinguishment of debt of $1,524,000 in its consolidated statements of operations for the fiscal year ended January 31, 2016. As of January 31, 2017 and 2016, $6,875,000 and $9,375,000, respectively, were outstanding under the SVB Term Loan. As of January 31, 2017, the interest rate on the SVB Term Loan was 3.28%. The Wellington Agreement The company also had an Amended and Restated Loan and Security Agreement (Wellington Agreement with Wellington Financial LP (Wellington). In May 2013, the Company entered into a Loan and Security Agreement with Wellington Financial LP (Wellington). The Loan and Security Agreement (the Wellington Agreement) consists of a $10,000,000 term loan facility and a $2,000,000 operating line of credit. The term loan carried a fixed interest rate of 9.5% per annum. The term loan consisted of an advance of $10,000,000 at the effective date with monthly interest only payments to be made through the maturity date, at which time the entire outstanding principal amount became due and payable. Additional interest accrued on the unpaid principal amount of the term loan at a per annum rate of 2.5% which was also due at the maturity date. The operating line of credit carried a variable interest rate of the greater of prime plus 2.5% or 6.0% per annum. Interest was payable monthly on the outstanding principal amount of the operating line of credit. Under the operating line of credit, the Company could borrow, prepay, and reborrow from time to time before the maturity date. All of the Company’s assets were pledged as collateral to Wellington on a senior basis (subordinated to the security interest of SVB by up to $8,000,000 in aggregate principal amount). Both the term loan and the operating line of credit had a maturity of May 2016, but could be extended annually to May 2017 and 2018 at the option of the Company, upon the satisfaction of certain conditions. In connection with the Wellington Agreement, the Company paid direct fees of $154,000. The Company also issued warrants to purchase 126,315 shares of Series D-1 convertible preferred stock with an exercise price of $7.60 per share or, at the option of the holder, shares of the Company’s preferred stock issued at its next round of equity financing. The initial fair value of the Series D-1 warrants was $1,446,000 (see Note 9). Both the cash fees and the initial fair value of the warrants were being amortized as interest expense over the term of the debt. During January 2014, the Wellington Agreement was amended to increase the term loan facility from $10,000,000 to $13,000,000, bringing the total loan commitment to $15,000,000. In connection with the January 2014 amendment, the Company paid direct fees of $45,000. The Company also issued warrants to purchase 31,579 shares of Series D-1 convertible preferred stock with an exercise price of $7.60 per share or, at the option of the holder, shares of the Company’s stock of the same class and series as issued at its next round of equity financing, if such financing generates proceeds of at least $5,000,000. In addition, the Company authorized an additional 250,000 shares of Series D-1 convertible preferred stock. The initial fair value of the Series D-1 warrants was $403,000 (see Note 9). Both the cash fees and the initial fair value of the warrants were being amortized as interest expense over the term of the debt. In October 2014, the Wellington Agreement was amended to consolidate the operating loan and related accrued interest into one term loan. The face value of the term loan became $15,408,000 ($13,000,000 original term loan plus the $2,000,000 operating loan plus the $408,000 interest accrued on the term loan). The terms of the amended agreement were not substantially different and therefore the amendment was accounted for as a debt modification. As such, the existing unamortized debt issuance costs were added to the new issuance costs and to be amortized over the new remaining term of the debt. The payment terms of the term loan were amended whereby the Company was required to make monthly interest only payments through the maturity date, which was extended to October 2017, and a final payment ranging from 2.5% to 7.5% of the aggregate principal balance of the term loan depending on the payment date along with the outstanding principal balance. The interest rate remained the same at a fixed rate of 9.5% and the accrued interest no longer continues to exist. In connection with the October 2014 amendment to the Wellington Agreement, the Company paid direct fees of $97,500. The Company also issued warrants to purchase 147,936 shares of Series D-1 convertible preferred stock with an exercise price of $7.60 per share or, at the option of the holder, shares of the Company’s stock of the same class and series as issued at its next round of equity financing, if such financing generates proceeds of at least $5,000,000. The initial fair value of the Series D-1 warrants was $1,767,000 (see Note 9). Both the cash fees and the initial fair value of the warrants were being amortized as interest expense over the term of the debt. In August 2015, all amounts outstanding under the Wellington Agreement were fully repaid in accordance with its terms. The remaining unamortized debt issuance costs of $2,564,000 were recorded as interest expense in the fiscal year ended January 31, 2016. The SVB Agreement includes various financial and non-financial covenants for which the Company was in compliance as of January 31, 2017. Amortization expense related to debt issuance costs and discounts for the fiscal years ended January 31, 2017, 2016 and 2015 was $22,000, $3,512,000 and $771,000, respectively, and is recorded as additional interest expense in the consolidated statements of operations. Total interest expense was $501,000, $6,021,000 and $3,087,000 for the fiscal years ended January 31, 2017, 2016 and 2015, respectively. The following table represents the Company’s short-term and long-term debt obligations: January 31, Rate Maturity 2017 2016 (in thousands) Silicon Valley Bank: Revolving line of credit P+1.25% or L+2.5% October 2018 (1) $ (6,500 ) $ (6,500 ) Term loan P+1.25% or L+2.5% September 2019 (6,875 ) (9,375 ) Total debt (13,375 ) (15,875 ) Debt, current portion 9,000 9,000 Current portion of unamortized debt discount (19 ) (19 ) Current portion of debt, net 8,981 8,981 Debt, less current portion 4,375 6,875 Long-term portion of unamortized debt discount (29 ) (49 ) Long-term debt, net 4,346 6,826 Total debt, net $ 13,327 $ 15,807 (1 ) The Company may borrow, prepay, and reborrow loans from time to time before the maturity date. Future principal payments of long-term debt as of January 31, 2017 were as follows: Principal (in thousands) Fiscal year ending January 31: 2018 $ — 2019 2,500 2020 1,875 Total $ 4,375 |