Note 6—Debt

The Company’s debt consisted of the following as of the dates presented:


	June 30,		December 30,
	2018		2017
	(in thousands)
Convertible promissory note, SVIC, net of debt discount of $761 and $868 in 2018 and 2017, respectively	$	14,239	$	14,132
Accrued interest on convertible promissory note with SVIC		783		634
Notes payable		115		-
		15,137		14,766
Less current portion		(115)		-
	$	15,022	$	14,766

On November 18, 2015, in connection with entering into the JDLA with Samsung, the Company issued to SVIC a Senior Secured Convertible Note (“SVIC Note”) and Stock Purchase Warrant (“SVIC Warrant”). The SVIC Note has an original principal amount of $15.0 million, accrues interest at a rate of 2.0% per year, is due and payable in full on December 31, 2021, and is convertible into shares of the Company’s common stock at a conversion price of $1.25 per share, subject to certain adjustments, on the maturity date of the SVIC Note. Upon a change of control of the Company prior to the maturity date of the SVIC Note, the SVIC Note may, at the Company’s option, be assumed by the surviving entity or be redeemed upon the consummation of such change of control for the principal and accrued but unpaid interest as of the redemption date. The SVIC Warrant grants SVIC a right to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $0.30 per share, subject to certain adjustments, is only exercisable in the event the Company exercises its right to redeem the SVIC Note prior to its maturity date, and expires on December 31, 2025.

The SVIC Warrant was valued at $1,165,000, based on its relative fair value, and was recorded as a debt discount. The Company also recorded $154,000 of debt issuance costs as a debt discount for professional services fees rendered in connection with the transaction. These amounts are being amortized over the term of the SVIC Note using the effective interest method. For the three and six months ended June 30, 2018 and July 1, 2017, the Company amortized $54,000, $107,000, $54,000 and $108,000, respectively, to interest expense in the accompanying condensed consolidated statements of operations.

In connection with the SVIC Note, SVIC was granted a first priority security interest in the Company’s patent portfolio and a second priority security interest in all of the Company’s other tangible and intangible assets. Upon issuance of the SVIC Note, the Company, SVB and SVIC entered into an Intercreditor Agreement pursuant to which SVB and SVIC agreed to their relative security interests in the Company’s assets. In May 2017, SVIC, SVB and TRGP entered into additional Intercreditor Agreements to modify certain of these lien priorities (see Note 8). Additionally, upon issuance of the SVIC Note and the SVIC Warrant, the Company and SVIC entered into a Registration Rights Agreement pursuant to which the Company is obligated to register with the SEC, upon demand by SVIC, the shares of the Company’s common stock issuable upon conversion of the SVIC Note or upon exercise of the SVIC Warrant.

The SVIC Note subjects the Company to certain affirmative and negative operating covenants. As of June 30, 2018, the Company was in compliance with its covenants under the SVIC Note.

Interest expense, including amortization of debt discounts and debt issuance costs, net of interest income, was as follows during the periods presented:


	Three Months Ended				Six Months Ended
	June 30,		July 1,		June 30,		July 1,
	2018		2017		2018		2017
	(in thousands)				(in thousands)
Interest expense:
SVB	$	6	$	8	$	24	$	21
SVIC		128		129		257		258
Others		1		4		3		16
		135		141		284		295
Interest income		(2)		(3)		(4)		(9)
	$	133	$	138	$	280	$	286