Annual report pursuant to Section 13 and 15(d)

Term Loan

Term Loan

12 Months Ended

Dec. 31, 2016

In August 2014, the Company received a $7.5 million secured term loan from a finance company. The loan is secured by a lien on the Company’s assets, excluding intellectual property, which is subject to a negative pledge. The loan contains certain additional nonfinancial covenants. In connection with the loan agreement, the Company’s cash and investment accounts are subject to account control agreements with the finance company that give the finance company the right to assume control of the accounts in the event of a loan default. Loan defaults are defined in the loan agreement and include, among others, the finance company’s determination that there is a material adverse change in the Company’s operations, notwithstanding adverse results of clinical trials. Interest on the loan is at a rate of the greater of 7.95%, or 7.95% plus the prime rate as reported in The Wall Street Journal minus 3.25%. The interest rate effective from loan inception to December 16, 2015 was 7.95%. Effective December 17, 2015, the prime rate as reported by The Wall Street Journal increased 0.25% resulting in the interest rate increasing to 8.20%. Effective December 15, 2016, the prime rate as reported by The Wall Street Journal increased an additional 0.25% resulting in an increase to the current interest rate, which was 8.45% as of December 31, 2016. The loan was interest‑only for nine months, and is repayable in equal monthly payments of principal and interest of approximately $305,000 over 27 months, which began in June 2015. Debt consisted of the following as of December 31, 2016 and 2015:



	December 31,			December 31,
	2016			2015
Term loan	$	2,374,031		$	5,688,256
Less: debt discount	(20,364		)	(126,700		)
Term Loan, net of debt discount	2,353,667			5,561,556
Less: current portion, net of debt discount	(2,353,667		)	(3,208,074		)
Long term debt, net of current portion and debt discount	$	—		$	2,353,482

Interest expense, which includes amortization of a discount and the accrual of a termination fee, was approximately $489,000 and $800,000 for the years ended December 31, 2016 and 2015, respectively, and is included in interest income (expense), net on the accompanying statements of operations. The Company will make future principal payments of $2,374,031 through the loan's maturity date in August 2017.

Upon issuance of the term loan, the Company paid lender fees of $110,000 and is required to pay a one‑time fee at maturity of $187,500. The lender fees were recorded as a discount to the carrying amounts of the current and long term portions of the term loan. Amortization of the debt discount was $106,000 and $159,000 during the years ended December 31, 2016 and 2015, respectively. Accretion of the one‑time fee was $56,000 and $84,000 during the years ended December 31, 2016 and 2015, respectively. The amortization of the debt discount and the accretion of the one-time fee are reflected as a components of interest expense within the accompanying statements of operations.