On February 10, 2012, the Company entered into a $15.0 million loan facility. Initial funding under the facility
was $10.0 million, which was received by the Company upon closing. Under the loan facility, the Company may borrow up to an additional $5.0 million provided that the Company achieves at least $2.5 million in cumulative product revenue, measured on a
trailing six-month basis as of January 31, 2013. As of September 30, 2012, the Company would need to generate an additional $2.1 million in product revenues prior to January 31, 2013 to meet this requirement.
The initial term loan accrues interest at a rate of 8% per annum plus the higher of (a) the 3-month LIBOR rate or
(b) 1.25%. Interest only payments will be made for the first twelve months of the loan term. Principal payments commence in March 2013 and principal and interest payments continue through maturity at September 2015.
In connection with this initial loan facility draw down, the Company issued warrants to purchase 36,657 shares of its common stock with an
exercise price of $6.82 per share. The warrants expire ten years from the date of issuance. The warrants were valued using the Black-Scholes option pricing model using the following assumptions: fair value of the underlying common
stock of $8.51 per share; volatility of 70%; no dividend yield; risk free interest rate of 1.96%; and an expected life of ten years. The relative fair value of the warrants, aggregating $240,000, has been accounted for as a debt discount and is
being recognized as interest expense over the term of the loan using the effective interest method. Additional warrants will be issued to the lenders in the event that the Company draws down an additional $5.0 million under the facility.
The term loan is secured by substantially all of the Company’s assets, other than its intellectual property, for which the Company
has provided a negative pledge. The term loan agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among others, covenants that limit or restrict the Company’s ability to incur indebtedness, merge or consolidate, dispose of assets, make acquisitions, pay dividends or make distributions, or repurchase
stock. In addition, the term loan agreement contains customary events of default that entitle the lenders to cause any or all of the Company’s indebtedness under the term loan agreement to become immediately due and payable and could cause the
lenders to foreclose on the collateral securing the indebtedness, including the Company’s cash and cash equivalents. The events of default include, among others, non-payment, inaccuracy of representations and warranties, covenant defaults,
bankruptcy and insolvency and the occurrence of a material adverse effect (as defined in the term loan agreement).