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Debt and Interest
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9 Months Ended | |
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Sep. 30, 2014
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| Debt Disclosure [Abstract] | ||
| Debt and Interest |
4. Debt and Interest
On February 13, 2014, the Company repaid its term loan with Hercules Growth Capital, Inc. (the “Hercules Note”), of which $13.2 million in principal was outstanding at the time of repayment. Early payment of the Hercules Note was $14.0 million, consisting of principal of $13.2 million, an end of term charge of $0.4 million, a prepayment fee of $0.3 million and interest of $0.1 million, all included as interest expense in the Unaudited Condensed Consolidated Statements of Operations. Prior to re-payment, in January 2014, the Company made a scheduled principal payment of $0.5 million on the Hercules Note.
Also on February 13, 2014, the Company executed a Promissory Note (the “IDB Note”) with the Israel Discount Bank of New York (the “Bank”) in an amount of up to $15.0 million. At September 30, 2014, the amount of debt outstanding under the IDB Note was $14.0 million. The Company used substantially all of the proceeds from the IDB Note to repay its prior loan from Hercules Technology Growth Capital, Inc. The Company may request revolving advances under the IDB Note in a minimum amount of $100,000 (or the remaining amount of the undrawn balance under the IDB Note, if such amount is less than $100,000). All amounts advanced under the IDB Note are due in full at the earlier of: (i) February 13, 2016, or (ii) on the Bank’s election following the occurrence and continuation of an event of default. The unpaid principal amount of each advance shall bear interest at a rate per annum equal to the rate payable on the Company’s money market account of 0.75% plus a margin of 150 basis points. The IDB Note contains various representations and warranties customary for financings of this type.
The obligations of the Company under the IDB Note are collateralized by a security interest in, a general lien upon, and a right of set-off against the Company’s money market account equal to amounts outstanding under the IDB Note, pursuant to the Assignment and Pledge of Money Market Account, dated as of February 13, 2014 (the “Pledge Agreement”). Pursuant to the Pledge Agreement, the Bank may, after the occurrence and continuation of an event of default under the IDB Note, recover from the money market account all amounts outstanding under the IDB Note. The Pledge Agreement requires that the money market account equal the amount of outstanding debt, until such time that the debt is repaid. The Pledge Agreement contains various representations, warranties, and covenants customary for pledge agreements of this type.
The Company will default on the IDB Note if, among other things, it fails to pay outstanding principal or interest when due. Following the occurrence of an event of default under the IDB Note, the Bank may: (i) declare the entire outstanding principal balance of the IDB Note, together with all accrued interest and other sums due under the IDB Note, to be immediately due and payable; (ii) exercise its right of setoff against any money, funds, credits or other property of any nature in possession of, under control or custody of, or on deposit with the Bank; (iii) terminate the commitments of the Bank; and (iv) liquidate the money market account to reduce the Company’s obligations to the Bank.
Interest expense for the three and nine months ended September 30, 2014 was $121,000 and $1.2 million, respectively. Interest expense for the three and nine months ended September 30, 2013 was $493,000 and $1.5 million, respectively. During the three and nine month period ended September 30, 2014 and the three and nine month period ended September 30, 2013, interest expense related to the Hercules Note was nil, $845,000, $454,000 and $1.3 million respectively, including nil, $435,000, $99,000 and $286,000 related to accretion of the debt discount, and nil, $43,000, $5,000 and $15,000 related to the amortization of financing costs, respectively. For the nine month period ended September 30, 2014, borrowings under the IDB Note were $14.0 million, and for the three and nine month periods ended September 30, 2014, interest expense incurred on the IDB Note was $81,000 and $201,000, and $3,000 and nil related to amortization of financing costs, respectively.
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