AKAO 2017 Annual Report

139 Changes in Internal Control Over Financial Reporting There were no changes in our internal controls over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting other than completion of the actions taken to remediate the material weakness identified as of June 30, 2017. Item 9B. Other Information. The information set forth below is included herein for the purpose of providing the disclosure required under “Item 1.01 - Entry into a Material Definitive Agreement,” “Item 1.02 – Termination of a Material Definitive Agreement”, “Item 2.03 - Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant” and “Item 8.01 – Other Information” of Form 8-K. Entry into a Material Definitive Agreement. On February 26, 2018 (the “Closing Date”), we entered into a loan and security agreement (the “Loan Agreement”) with Silicon Valley Bank. The Loan Agreement provides for (i) a $25.0 million Term A loan facility with a maturity of five years (the “Term A Loan”) and (ii) an up to $25.0 million Term B loan facility, which may be drawn, subject to certain conditions, by us during the first 12 months after the Closing Date ( the “Term B Loans” and together with the Term A Loan, the “Term Loans”). Each Term B Loan has a maturity of four years. Borrowings under the Term A Loan bear interest at a floating per annum rate equal to the greater of (a) the prime rate minus 1.50% and (b) 3.00%, and the Term B Loans bear interest through maturity at a floating per annum rate equal to the greater of (a) 1.00% above the prime rate and (b) 5.50%. We will be required to pay an unused Term B Loan fee of 1.00% of the commitments under the Term B Loans if we do not borrow any Term B Loans. We are permitted to make interest-only payments on the Term A Loan through February 2020 and on the Term B Loans for the first twenty-four (24) months following the funding date of each respective Term B Loan after which we will be required to repay the Term A Loan in 36 consecutive equal monthly installments of principal and repay any Term B Loans in 24 consecutive equal monthly installments of principal. We are obligated to pay a fee equal to 6.00% of the funded Term Loans upon the earliest to occur of the maturity date, the prepayment or repayment of such Term Loans or he termination of the Loan Agreement. We may voluntarily prepay all, but not less than all, of the outstanding Term Loans. The Term Loans are secured by substantially all of our assets, except for our intellectual property which is subject to a negative pledge and certain other customary exclusions. The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among others, requirements as to financial reporting and insurance and restrictions on our ability to dispose of our business or property, to change our line of business, to liquidate or dissolve, to enter into any change in control transaction, to merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, to incur additional indebtedness, to incur liens on our property, to pay any dividends or other distributions on capital stock other than dividends payable solely in capital stock or to redeem capital stock. We have also agreed to have on deposit at Silicon Valley Bank cash in an aggregate amount equal to the greater of (a) $48.0 million and (b) the “Monthly Cash Burn,” which is defined as the difference of (1)(i) net loss plus (ii) unfinanced capital expenditures minus (2)(i) depreciation and amortization expenses, (ii) non- cash stock compensation expense and (iii) other non-cash expenses as approved by Silicon Valley Bank. If at any time our aggregate balances at Silicon Valley Bank are less than the foregoing, we are required to deposit at Silicon Valley Bank cash collateral in an amount equal to the outstanding Term A Loan. In addition, the Loan Agreement contains customary events of default that entitle Silicon Valley Bank to cause our indebtedness under the Loan Agreement to become immediately due and payable, and to exercise remedies against us and the collateral securing the Term Loans, including our cash. Under the Loan Agreement, an event of default will occur if, among other things, we fail to make payments under the Loan Agreement, we breach any of our covenants under the Loan Agreement, subject to specified cure periods with respect to certain breaches, Silicon Valley Bank determines that a material adverse change has occurred, we or our assets become subject to certain legal proceedings, such as bankruptcy proceedings, we are unable to pay our debts as they become due or we default on contracts with third parties which would permit the holder of indebtedness to accelerate the maturity of such