Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Note Payable

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Note 5 - Note Payable
6 Months Ended
Jun. 30, 2016
Notes to Financial Statements  
Debt Disclosure [Text Block]
5.        Note Payable
  
On September 30, 2014, we entered into a Loan and Security Agreement, as amended on February 19, 2015, May 14, 2015, November 30, 2015 and March 18, 2016 (collectively, the “2014 Loan Agreement”), with Pacific Western Bank (as successor in interest by merger to Square 1 Bank) (the “Lender”), pursuant to which we received a term loan in the amount of $5,000,000, funded in three tranches. The first tranche of $2,500,000 was provided to us on October 1, 2014 and proceeds of $500,000 from the second tranche were received on each of February 19, 2015, March 16, 2015 and April 6, 2015 for aggregate proceeds of $1,500,000.  The terms of the loan also required that the Company meet certain financial covenants and milestones in connection with the Company’s randomized, blinded and sham-controlled clinical trial in Europe and Canada (the “OUS Clinical Trial”), and on July 15, 2015 we received the final $1,000,000 of the term loan with a drawdown of funds from the third tranche.
 
In connection with the 2014 Loan Agreement, we entered into an Intellectual Property Security Agreement, dated September 30, 2014, pursuant to which a first priority security interest was created in all of our intellectual property, and we issued a 10-year warrant to the Lender for the purchase of 58,962 shares of the Company’s common stock at an exercise price $4.24 per share, and pursuant to the first amendment to the 2014 Loan Agreement in February 2015, such number of shares to automatically increase in the event the Company fails to meet certain covenants. In connection with the second amendment to the 2014 Loan Agreement in May 2015, we issued a second 10-year warrant to the Lender to purchase a total of 3,125 shares of common stock at an exercise price of $2.96 per share. (See Note 7.)
 
On June 20, 2016, we entered into a Loan and Security Agreement (the “2016 Loan Agreement”) with Western Alliance Bank (the “Lender”), pursuant to which the Lender agreed to loan us up to an aggregate of $10,000,000 payable in two tranches of $7,500,000 and $2,500,000. The funding conditions for both tranches were satisfied as of the closing date, and therefore, the aggregate principal amount of $10,000,000 was provided to us on June 20, 2016. The proceeds received were used to repay the outstanding existing indebtedness under the 2014 Loan Agreement and the remaining balance will be used for working capital purposes and to fund general business requirements. The borrowings are repayable in interest only payments until July 1, 2017 and then 30 monthly equal installments of principal and interest. The term loan shall bear interest on the outstanding obligations under the loan at a floating per annum rate equal to the greater of (i) the Index Rate (i.e., the 30 day U.S. LIBOR rate reported in the Wall Street Journal) plus 6.96%, determined as of the last day of each month, and (ii) 7.40%.
 
In connection with the 2016 Loan Agreement, we issued a 10-year warrant to the Lender to purchase a total of 100,402 shares of the Company’s common stock at an exercise price of $4.98 per share. (See Note 7.)
 
All borrowings under the 2016 Loan Agreement are collateralized by substantially all of the Company’s assets, including intellectual property.
 
The Company is also required to meet certain financial and other covenants in connection with the 2016 Loan Agreement. As of June 30, 2016, the Company was in compliance with all covenants.
 
As of June 30, 2016, future minimum payments under the note payable are as follows (in thousands):
 
Year Ending December 31,
 
 
 
 
2016 (remaining 6 months)
  $ 315  
2017
    2,719  
2018
    4,463  
2019
    4,512  
Total payments
    12,009  
Less: Amount representing interest
    (2,009 )
Present value of obligations
    10,000  
Less: Unamortized debt discount
    (440 )
      9,560  
Less: Note payable, noncurrent portion
    9,560  
Note payable, current portion
  $ -