Notes payable consisted of the following at December 31, 2019 and 2018 (in thousands):

	December 31,
	2019			2018
8% secured promissory notes due February 2019	$	—		$	250
0% convertible notes due January 2021		91			275
4% promissory note due December 2020		500			847
0% promissory note due April 2019		—			418
8% promissory note due March 2021		—			2,107
12% convertible notes due October 2019		1,775			4,000
12% convertible notes due November 2019		400			1,220
12% convertible notes due May 2020		1,500			—
12% convertible notes due July, August and September 2020		4,235			—
12% secured promissory note due September 2020		7,858			—
Total face amount		16,359			9,117
Unamortized discount		(3,047	)		(1,780	)
Total carrying value		13,312			7,337
Amount classified as current		13,227			4,464
Amount classified as long-term	$	85		$	2,873

In July and August 2017, the Company issued secured promissory notes with 1-year terms bearing interest at 8% in the aggregate amount of $1,350,000. Of that amount, $350,000 was paid in August 2018 and $750,000 was retired in the August 15, 2018 debt exchange. The remaining $250,000 note payable was not paid upon maturity, and went into default. Upon agreement with the holder, the note was paid in full, including additional default interest on February 14, 2019.

In January 2018, the Company issued an aggregate of $1,000,000 of 3-year 0% convertible notes and warrants. The notes are convertible into an aggregate of 570,287 shares of common stock of the Company and the warrants are exercisable for 570,287 shares of common stock of the Company at an exercise price of $9.15 per share. The Company valued the debt and the warrants in accordance with ASC 470-20-25-2 using a binomial option pricing model for the warrants, and the conversion feature, which was determined to be a Beneficial Conversion Feature, was recorded at fair value based on the difference between the closing market price of the Company’s stock on the date of the transaction and the implied conversion price in the fair value of the debt. The valuation assumed a 105% volatility rate of the Company’s common stock, a risk-free interest rate of 2.20% and a credit spread of 7.70%. The warrants were assigned a value of $127,000 and the conversion feature was assigned a value of $144,000. The remaining value of $729,000 was assigned to the debt. The aggregate discount of $271,000 is being amortized to interest expense over the 3-year life of the notes on a straight-line basis. In connection with the debt exchange on August 15, 2018 (see Note 11), holders of an aggregate principal amount of $725,000 of the notes converted their notes to common stock, leaving a principal balance of $275,000 outstanding at December 31, 2018. The unamortized discount related to the converted notes amounted to $163,000, which amount was included in the loss on debt extinguishment. Excluding this amount, accretion of the discount for the year ended December 31, 2018 amounted to $45,000. In connection with the debt exchange in October 2019 (see Note 11), holders of an aggregate principal amount of $184,000 of the notes converted their notes into common stock, leaving a principal balance of $91,000 outstanding at December 31, 2019. The unamortized discount related to the converted notes amounted to $15,000, which amount was included in the loss on debt extinguishment. Excluding this amount, discount accretion on these notes for the year ended December 31, 2019 amounted to $33,000. Subsequent to December 31, 2019, the $91,000 remaining note was converted into common stock.

In April 2018, the Company issued a $1,000,000 installment note bearing interest at 4.02% per annum due April 30, 2021. The note specified varying monthly payments of principal and interest through 2021. The Company paid down the principal balance to $847,000 during 2018 and $704,000 during 2019. In connection with the debt exchange in October 2019 (see Note 11), $204,000 of the note plus accrued interest was converted into common stock, leaving an outstanding balance of $500,000. Subsequent to December 31, 2019, the note was amended so that the outstanding balance plus accrued interest at 6% from March 24, 2020 are now due on December 31, 2020.

In August 2018, in connection with the Unitron acquisition described in Note 16, the Company assumed the remaining balance of the $868,000, 0% promissory notes with $450,000 paid in October 2018 and $418,000 paid in April 2019.

In September 2018, the Company entered into a Note Consolidation Agreement with a lender in which 12 promissory notes and associated accrued interest were consolidated into a single unsecured 8% promissory note in the principal amount of $2,107,000. The notes were due in a lump sum on March 31, 2021 with interest compounding annually. Because the present value of the cash flows under the terms of the new debt instrument was less than 10% different from the present value of the aggregate remaining cash flows under the terms of the original instruments, the debt instruments were not considered to be substantially different and the transaction was not considered a debt extinguishment. In connection with the debt exchange in October 2019 (see Note 11), this note plus accrued interest was converted into common stock.

In October 2018, the Company issued an aggregate of $4,000,000 of 1-year 12% convertible notes and warrants. The notes were convertible at the option of the holder after six months from the date of issuance into an aggregate of 941,181 shares of common stock of the Company and the warrants were exercisable for 470,592 shares of common stock of the Company at an exercise price of $4.25 per share. The Company valued the debt and the warrants in accordance with ASC 470-20-25-2 using a binomial option pricing model for the warrants, and the conversion feature, which was determined to be a Beneficial Conversion Feature, was recorded at fair value based on the difference between the closing market price of the Company’s stock on the date of the transaction and the implied conversion price in the fair value of the debt. The valuation assumed a 90% volatility rate of the Company’s common stock, a 25% discount on the value of the underlying stock due to trading restrictions, and a risk-free interest rate of 2.47%. The warrants were assigned a value of $769,000 and the conversion feature was assigned a value of $1,173,000. The remaining value of $2,058,000 was assigned to the debt. The aggregate discount of $1,942,000 is being amortized to interest expense over the 1-year life of the notes on a straight-line basis, which approximates the effective interest method. Accretion of the discount for the year ended December 31, 2018 amounted to $324,000. In connection with the debt exchange in October 2019 (see Note 11), holders of an aggregate principal amount of $2,225,000 of the notes converted their notes plus accrued interest into common stock, leaving a principal balance of $1,775,000 outstanding at December 31, 2019. The unamortized discount related to the converted notes amounted to $8,000, which amount was included in the loss on debt extinguishment. Excluding this amount, discount accretion on these notes for the year ended December 31, 2019 amounted to $1,610,000. In December 2019, $1,300,000 of the notes were extended to February 2020, and the Company committed to collateralize the notes. Subsequent to December 31, 2019, $1,700,000 of the remaining balance plus accrued interest was converted to common stock, and the $75,000 note was amended so that the outstanding balance plus accrued interest at 6% from November 1, 2019 are now due on June 30, 2020.

In November 2018, the Company issued an aggregate of $1,220,000 of 1-year 12% convertible notes and warrants. The notes were convertible at the option of the holder after six months from the date of issuance into an aggregate of 277,274 shares of common stock of the Company and the warrants are exercisable for 138,638 shares of common stock of the Company at an exercise price of $4.40 per share. The Company valued the debt and the warrants in accordance with ASC 470-20-25-2 using a binomial option pricing model for the warrants. The conversion feature was not assigned any value as the implied conversion price in the fair value of the debt was higher than the closing market price of the Company’s stock on the date of the transaction. The valuation assumed a 90% volatility rate of the Company’s common stock, a 25% discount on the value of the underlying stock due to trading restrictions, and a risk-free interest rate of 2.52%. The warrants were assigned a value of $118,000 and the remaining value of $1,102,000 was assigned to the debt. The discount of $118,000 is being amortized to interest expense over the 1‑year life of the notes on a straight-line basis. Accretion of the discount for the year ended December 31, 2018 amounted to $10,000. In connection with the debt exchange in October 2019 (see Note 11), holders of an aggregate principal amount of $820,000 of the notes converted their notes plus accrued interest into common stock, leaving a principal balance of $400,000 outstanding at December 31, 2019. The unamortized discount related to the converted notes amounted to $5,000, which amount was included in the loss on debt extinguishment. Excluding this amount, discount accretion on these notes for the year ended December 31, 2019 amounted to $104,000. Subsequent to December 31, 2019, the remaining $400,000 note was converted to common stock, with unpaid interest of $64,000 payable by September 24, 2020.

In May 2019, the Company issued an aggregate of $3,500,000 of 1-year 12% convertible notes and warrants. The notes were convertible at the option of the holder after six months from the date of issuance into an aggregate of 1,258,996 shares of common stock of the Company and the warrants are exercisable for 629,500 shares of common stock of the Company at an exercise price of $2.72 per share. The Company valued the debt and the warrants in accordance with ASC 470-20-25-2 using a binomial option pricing model for the warrants, and the conversion feature, which was determined to be a Beneficial Conversion Feature, was recorded at fair value based on the difference between the closing market price of the Company’s stock on the date of the transaction and the implied conversion price in the fair value of the debt. The valuation assumed a 105% volatility rate of the Company’s common stock, a 30% discount on the value of the underlying stock due to trading restrictions, and a risk-free interest rate of 2.33%. The warrants were assigned a value of $507,000 and the conversion feature was assigned a value of $243,000. In addition, the Company incurred fundraising costs of $190,000, which were recorded as an additional discount. The remaining value of $2,750,000 was assigned to the debt. The aggregate discount of $940,000 is being amortized to interest expense over the 1-year life of the notes on a straight-line basis, which approximates the effective interest method. In connection with the debt exchange in October 2019 (see Note 11), holders of an aggregate principal amount of $2,000,000 of the notes converted their notes plus accrued interest into common stock, leaving a principal balance of $1,500,000 outstanding at December 31, 2019. The unamortized discount related to the converted notes amounted to $304,000, which amount was included in the loss on debt extinguishment. Excluding this amount, discount accretion on these notes for the year ended December 31, 2019 amounted to $485,000. Subsequent to December 31, 2019, the $1,500,000 remaining balance plus accrued interest was converted to common stock.

In July, August and September 2019, the Company issued a number of tranches of 1-year 12% convertible notes and warrants with an aggregate principal amount of $4,551,000. The notes and warrants are convertible/exercisable at the option of the holders into the Company’s shares of common stock at any time during their respective exercisability period commencing on the date the Company obtains shareholder or other required regulatory approvals to permit the conversion of the notes (the “Approval Date”). The funds raised from the issuance of these notes were used to finance the acquisition of Simply Mac. At the time of issuance of the notes, both the note conversion prices and the warrant exercise prices were structured to be a discount to the current market price of the Company’s stock, certain notes at a 20% discount to the 5-day closing average price and others at a 30% discount to the 2-day volume weighted average price. However, in order to issue the convertible notes and warrants below market, shareholder approval was required according to Nasdaq rules to which the Company was subject at the time. Consequently, the trigger date for the conversion and warrant pricing was set as the Approval Date. In accordance with ASC 815, the conversion options embedded in the respective notes meet the criteria of a derivative instrument liability and are bifurcated from the host debt contract. Similarly, the warrants meet the criteria of a freestanding derivative instrument liability. Accordingly, the notes and warrants are recorded at fair value as of the respective issuance dates and marked-to-market at subsequent reporting dates with the changes recorded as gains or losses. Based on facts and circumstances as of the respective measurement dates, a Monte-Carlo simulation, a continuous stochastic-process of randomly generating values for uncertain variables, was utilized in determining the fair value of the notes and warrants. This valuation methodology provides the ability and flexibility of capturing the variability and uncertainty underlying the instruments’ unique conditions, features, and terms. The valuations assumed a 70% expected annualized equity volatility rate of the Company’s common stock. Determination of this rate began with the full-observed historical volatility of the stock dating back to March 2018, immediately following the announcement of completion of the Cooltech merger and related stock split. It was noted that the Company did not have any exchange-traded options since the merger from which to obtain an implied volatility. Certain adjustments were then applied to the full-observed historical volatility in the form of excluding the effects of the Company’s extraordinarily-significant announcements and events during such period and capturing market participants’ views of pricing convertible notes (compared to own non-convertible debt with similar maturity or publicly-traded comparable debt issuances) and illiquid shares and warrants. Considering the utilization of unobservable inputs, as defined by ASC 820, the fair value of the notes and warrants as of the respective issuance dates and at December 31, 2019 are level 3 measurements. As a result of the valuation methodology, the conversion feature was assigned a value of $2,471,000 and the warrants were assigned a value of $1,897,000. The remaining value of $182,000 was assigned to the debt. The aggregate discount of $4,368,000 is being amortized to interest expense over the 1-year life of the notes on a straight-line basis, which approximates the effective interest method. In connection with the debt exchange in October 2019 (see Note 11), holders of an aggregate principal amount of $316,000 of the notes converted their notes plus accrued interest into common stock, leaving a principal balance of $4,235,000 outstanding at December 31, 2019. The unamortized discount related to the converted notes amounted to $190,000, which amount was included in the loss on debt extinguishment. Excluding this amount, discount accretion on these notes for the year ended December 31, 2019 amounted to $1,288,000. Subsequent to December 31, 2019, the $4,235,000 remaining balance plus accrued interest was converted to common stock.

On September 25, 2019, in connection with the acquisition of Simply Mac discussed in Note 17, the Company issued a $7,858,000 secured promissory note to GameStop. The note bore interest at a rate equal to 12% per annum and called for the Company to make four equal installment payments of $1,965,000, plus accrued interest, on each 3 month anniversary of the note. The note was secured by, among other things, the Simply Mac inventory and accounts receivable. The first installment payment was due on December 25, 2019, but the Company was unable to make the payment. Consequently, at December 31, 2019, the note was in default, and GameStop provided the Company with an official Notice of Default on January 15, 2020. As described in Note 18, on March 11, 2020, the Company and GameStop entered into agreements to amend the note so it is no longer in default.

Interest expense for notes payable for the years ended December 31, 2019 and 2018 amounted $4,867,000 and $1,153,000, respectively, including accretion of discounts of $3,519,000 and $629,000, respectively.

Derivative Liability: As noted above, the $4,368,000 discount applied against the July, August and September convertible notes to account for the convertibility feature and warrants was recorded as a derivative liability on the Company’s balance sheet. At December 31, 2019, although the Company was no longer subject to Nasdaq requirements for shareholder approval, it was determined that the conversion features and and warrants did not have fixed conversion or exercise prices. Accordingly, these instruments continued to be accounted for as derivative liabilities. The Company used the same methodology as described above to value the derivative liabilities at December 31, 2019. In connection with the debt exchange in October 2019 (see Note 11), the Company issued warrants valued at $3,586,000 that were also recorded as derivative liabilities. These warrants were valued at issuance date and at December 31, 2019 utilizing the methodology described in Note 11, and are level 3 measurements. Total derivative liabilities of $7,954,000 were marked-to-market at December 31, 2019, at which date the fair market value amounted to $1,721,000. The decrease of $6,233,000 was recorded as other income in the Company’s statement of operations for the year ended December 31, 2019.