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Debt | 9 Months Ended
--- | ---
Sep. 28, 2019
Debt |
Debt | Note 5—Debt The Company’s debt consisted of the following (in thousands):
|  | September 28, |  | December 29,
|  | 2019 |  | 2018
Senior secured convertible note, due December 2021, including accrued interest of $1,159 (2019) and $934 (2018), respectively |  | $ | 16,159 |  | $ | 15,934
Unsecured convertible note, due August 2020, including accrued interest of $1 (2019) and $62 (2018) |  |  | 1,022 |  |  | 2,332
Note payable |  |  | — |  |  | 376
Unamortized debt discounts and issuance costs |  |  | (519) |  |  | (920)
|  |  | 16,662 |  |  | 17,722
Less: current portion |  |  | (997) |  |  | (376)
|  | $ | 15,665 |  | $ | 17,346
Senior Secured Convertible Note 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 $1.2 million, based on its relative fair value, and was recorded as a debt discount. The Company also recorded $0.2 million of debt issuance costs as a debt discount for professional services fees rendered in connection with the transaction. These amounts are being amortized to interest expense over the term of the SVIC Note using the interest method. During the three and nine months ended September 28, 2019 and September 29, 2018, interest expense related to the amortization of the issuance costs associated with the liability component was not material. As of September 28, 2019, the outstanding principal and accrued interest on the SVIC Note was $16.2 million, and the outstanding SVIC Note balance, net of unamortized debt discounts and issuance costs, was $15.7 million. 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 7). 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 September 28, 2019, the Company was in compliance with its covenants under the SVIC Note. Unsecured Convertible Note On August 27, 2018, the Company entered into a Securities Purchase Agreement with Iliad Research and Trading, L.P. (“Iliad”) (the “Iliad Purchase Agreement”), pursuant to which the Company issued a convertible promissory note in the principal amount of $2.3 million (“Iliad Note”) with an original issue discount of $0.2 million. The Iliad Note bears interest at an annual rate of 8% and matures on August 27, 2020, unless earlier repurchased, redeemed or converted in accordance with its terms. The Iliad Note provides Iliad with the right to convert, at any time, all or any part of the outstanding principal and accrued but unpaid interest into shares of the Company’s common stock at a conversion price of $0.36 per share (“Lender Conversion Price”). Further, beginning on April 1, 2019, the Iliad Note also provides Iliad with the right to redeem all or any portion of the Iliad Note (“Redemption Amount”) up to a maximum monthly amount of $0.35 million. The payments of each Redemption Amount may either be made in cash, by converting such Redemption Amount into shares of the Company’s common stock (“Redemption Conversion Shares”), or a combination thereof, at the Company’s election. The number of Redemption Conversion Shares equals the portion of the applicable Redemption Amount being converted divided by the lesser of the Lender Conversion Price or the Market Price, that is 85% of the Company’s lowest closing bid price during the 20 trading days immediately preceding the applicable redemption date (“Redemption Conversion Price”), provided that the Market Price shall not be less than $0.11 per share (the “Redemption Price Floor”). In the event any applicable redemption conversion price is below the Redemption Price Floor then either: (i) the Company will honor the redemption conversion at the then effective redemption conversion price for a Redemption Amount not to exceed $0.15 million if the redemption conversion price is equal to or greater than $0.06 per share or (ii) the Company will pay the applicable Redemption Amount up to $0.15 million in cash and not in Redemption Conversion Shares. The $2.1 million of proceeds received from the issuance of the Iliad Note was initially allocated between long-term debt (the liability component) at $1.9 million and additional paid-in capital (the equity component) at $0.2 million, within the condensed consolidated balance sheet. The carrying amount of the liability component was calculated using the fair value of a similar liability without a conversion feature. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the proceeds received. The amount allocated to the equity component along with the original issue discount and fees paid to Iliad is amortized to interest expense over the expected life of 14 months using the interest method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. The issuance costs incurred related to the issuance of the Iliad Note were not material. As of September 28, 2019, the outstanding principal and accrued interest on the Iliad Note was $1.0 million, and the outstanding Iliad Note balance, net of unamortized debt discounts and issuance costs, was $1.0 million. During the three and nine months ended September 28, 2019, Iliad converted $0.8 million and $0.9 million, respectively, of the outstanding principal and accrued interest on the Iliad Note to 3,247,000 shares and 3,624,074 shares, respectively, of the Company’s common stock at the Redemption Conversion Price. In addition, during the nine months ended September 28, 2019, Iliad converted $0.5 million of the outstanding principal and accrued interest on the Iliad Note to 1,388,890 shares of the Company’s common stock at the Lender Conversion Price. Iliad did not convert any outstanding principal and accrued interest on the Iliad Note at the Lender Conversion Price during the three months ended September 28, 2019. Subsequent to September 28, 2019, Iliad converted $0.7 million of the outstanding principal and accrued interest on the Iliad Note to 2,905,873 shares of the Company’s common stock at the Redemption Conversion Price. The Iliad Note is not secured and does not have any financial covenants requirements for which the Company needs to comply. The Company makes certain customary representations and warranties and has agreed to customary covenants and obligations. The Iliad Purchase Agreement and Iliad Note contain customary events of default upon the occurrence and during the continuance of which all obligations under the Iliad Purchase Agreement and Iliad Note may be declared immediately due and payable.

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