11.	Long-term Obligations

On June 28, 2013 we entered into a Loan and Security Agreement (Loan Agreement) with Oxford Finance LLC and Silicon Valley Bank (together, the Lenders), pursuant to which the Lenders funded an aggregate principal amount of $27.0 million (Term Loan), subject to the terms and conditions set forth in the loan agreement. The Term Loan accrues interest at a fixed rate of 9.75% per annum. Pursuant to the Loan Agreement, we are required to make interest only payments through July 1, 2014 and thereafter we are required to make payments of principal and accrued interest in equal monthly installments sufficient to amortize the Term Loan through July 1, 2017, the maturity date. At maturity of the Term Loan, or the earlier repayment in full following a voluntary prepayment or upon acceleration, the Company is required to make a final payment fee in an aggregate amount equal to $1,795,000. In connection with the Term Loan, on June 28, 2013, we issued to the Lenders warrants to purchase up to an aggregate of 596,553 shares of our common stock at an exercise price of $2.26 per share. These warrants are immediately exercisable and will expire on June 28, 2020.

In connection with the funding of the Loan Agreement, we prepaid all outstanding amounts under the prior loan agreement, at which time the Company’s obligations under the prior loan agreement immediately terminated. The Company paid to the prior agent and the prior lenders approximately $18,866,000, consisting of the then outstanding principal balance due of approximately $17,325,000, accrued but unpaid interest of approximately $119,000, a final payment fee (net of fees waived or refunded by the Lenders under the new loan agreement) of approximately $1,078,000, a prepayment fee (net of fees waived or refunded by the Lenders under the new loan agreement) of approximately $312,000 and other customary lender fees and expenses.

The net proceeds of the Term Loan, after payment of lender fees and expenses and prepaying all the outstanding amounts relating to the prior loan agreement, were approximately $7.8 million.

For the continuing Lenders, we accounted for this amendment as a debt modification. Accordingly, related fees of $1,942,000 were recorded as debt discount from the prior loan, and along with the unamortized debt discount will be amortized as an adjustment of interest expense using the effective interest method. For one existing lender that did not participate in the Term Loan, the payoff of their loan was accounted for as debt extinguishment. Accordingly, a loss on debt extinguishment of $708,000 was recorded, which includes that lender’s portion of unamortized fees and discounts along with prepayment and final payment fees.

We allocated the aggregate proceeds of the Term Loan between the warrants and the debt obligations based on their relative fair values. The fair value of the warrants issued to the Lenders was calculated utilizing the Black-Scholes option pricing model. We are amortizing the resulting additional discount of $949,000 to interest expense over the term of the loan using the effective interest method. The overall effective interest rate for the Term Loan is 13.86%. The Term Loan is collateralized by the tangible assets of the company, including a security interest in substantially all of its existing and after-acquired assets.

On September 19, 2014, we entered into a Letter Agreement with the Lenders pursuant to which the Lenders waived financial covenant compliance pursuant to the Loan Agreement through October 31, 2014. The Loan Agreement requires the Company to maintain certain minimum cash balances at all times during the term of the Loan Agreement. In exchange for the above waiver, the Company agreed to re-price all 596,553 outstanding warrants issued by the Company to Oxford Finance LLC and Silicon Valley Bank pursuant to the Loan Agreement, with an exercise price per share equal to the lower of (i) the closing price per share of the Company’s common stock on September 30, 2014, or (ii) the average closing price per share of the Company’s common stock for October 1, 2 and 3, 2014.

On September 29, 2014 we entered into a 2^nd Amendment to the Loan Agreement with the Lenders Pursuant to the amended Loan Agreement, and we were provided a conditional waiver of principal payments subject to meeting certain capital raise requirements, which we achieved in October. The waiver of principal payments continues through April 1, 2015 and we are then required to make payments of principal and accrued interest in equal monthly installments sufficient to amortize the Term Loan through the maturity date.

Additional details relating to the outstanding Term Loan as of December 31, 2014, are presented in the following table:

Origination Date		Original Loan Amount				Interest Rate				Current Monthly Payment*			Original Term		Remaining Principal (Face Value)
June 2013		$	27,000,000				9.75	%		$	203,434		48 Months		$	25,038,125

* Current monthly payment is inclusive of interest only

As of December 31, 2014, the future contractual principal and final fee payments on all of our debt and lease obligations are as follows:

Years Ending December 31,

2015	$	7,462,000
2016		10,805,000
2017		8,596,000
Total	$	26,863,000

Reconciliation of Face Value to Book Value as of December 31, 2014

Total debt and lease obligations, including final payment fee (Face Value)	$	26,863,000
Less: Debt discount		(1,459,000	)
Total:		25,404,000
Less: Current portion		(7,363,000	)
Long-term obligation	$	18,041,000

Our interest expense for the years ended December 31, 2014, 2013 and 2012 was $4,371,000, $3,396,000 and $3,386,000, respectively. Interest expense is calculated using the effective interest method, therefore it is inclusive of non-cash amortization in the amount of $1,220,000, $893,000 and $930,000, respectively, related to the amortization of the debt discount and capitalized loan fees.