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Long-Term Debt | 3 Months Ended
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Mar. 31, 2021
Long-Term Debt |
Long-Term Debt | 9. Long-Term Debt Senior Convertible Notes and Warrants On December 17, 2019, the Company completed the issuance and sale of $3,000 aggregate principal amount of secured convertible notes of the Company (the “Notes”) and warrants (the “Warrants”) to purchase 340,909 shares of common stock, par value $0.001 per share of the Company (the “Common Stock”), in a private placement transaction. The Notes and Warrants were issued and sold to Edward D. Bagley, an affiliate of the Company, on the terms and conditions of a Note Purchase Agreement dated December 8, 2019 between the Company, certain subsidiary guarantors of the Company, and Mr. Bagley. Mr. Bagley is an affiliate of the Company and was the beneficial owner of approximately 46.6% of the Company’s issued and outstanding shares of Common Stock at the time that the Notes and Warrants were issued to him. The Notes will mature on December 17, 2023 (the “Maturity Date”) and will accrue interest at a variable rate adjusted on a quarterly basis and equal to two and one-half percent (2.5%) over the greater of (x) five and one-quarter percent (5.25%) and (y) the Prime Rate as published in the Wall Street Journal (New York edition) as of the beginning of such calendar quarter. The Notes may be converted into shares of the Company’s Common Stock at any time at the election of Mr. Bagley at an initial conversion price of $2.11 per share (the “Conversion Price”), or 120% of the closing price of the Common Stock on December 6, 2019 as reported on the Nasdaq Capital Market. Also, the Company can cause a mandatory conversion of the Notes if the volume weighted average closing price of the Common Stock over 90 consecutive trading days exceeds 200% of the Conversion Price. In addition, the Notes may be redeemed by the Company for cash at any time after December 17, 2020 upon payment of the outstanding principal balance of the Notes and any unpaid and accrued interest. The Company also is required to redeem the Notes upon the occurrence of a change in control of the Company. The Warrants have an initial exercise price equal to $1.76, the closing price of the Common Stock on December 6, 2019 as reported on the Nasdaq Capital Market, and are exercisable until December 17, 2026. The Warrants must be exercised for cash, unless at the time of exercise there is not a then effective registration statement for the resale of the shares of Common Stock issuable upon exercise of the Warrants, in which case the Warrants may be exercised via a cashless exercise feature that provides for net settlement of the shares of Common Stock issuable upon exercise. Concurrent with the issuance of the Notes and Warrants pursuant to the Note Purchase Agreement, the Company, the Guarantors and Mr. Bagley entered into a Guaranty and Collateral Agreement (the “Collateral Agreement”) pursuant to which the Company and the Guarantors granted Mr. Bagley a first priority lien interest in all of the Company’s assets as security for the Company’s performance of its obligations under the Notes and Warrants. The net proceeds after original issue discount and issuance costs of $346 were approximately $2,654. The Company expects to use the proceeds from the sale of the Notes and Warrants for general corporate purposes and working capital. In accounting for the issuance of the Notes, the Company separated Notes and Warrants into liability and equity components. The carrying amount of Warrants, being an equity component, was first calculated using Black-Scholes method with the following assumptions:
Risk-free interest rate | 1.82%
Expected life of warrants (years) | 7
Expected price volatility | 49.94%
Expected dividend yield | 0%
The carrying amount of the Notes was then determined by deducting the fair value of the Warrants from the principal amount of the Notes. The carrying amount of the Notes was further separated into equity and liability components after separating the value of the conversion feature into an equity component and leaving the remaining value as liability. The equity component is not remeasured while the Notes and Warrants continue to meet the conditions for equity classification for equity components. The original issue discount and issuance costs are netted against the liability. The following table represents the carrying value of Notes and Warrants:
|  | March 31, 2021 |  |  | December 31, 2020 |
Liability component: |  |  |  |  |  |  |  |
Principal |  | $ | 2,910 |  |  | $ | 3,000 |
Less: debt discount and issuance costs, net of amortization |  |  | (532 | ) |  |  | (581 | )
Net carrying amount |  | $ | 2,378 |  |  | $ | 2,419 |
Equity component(1): |  |  |  |  |  |  |  |
Warrants |  | $ | 318 |  |  | $ | 318 |
Conversion feature |  |  | 122 |  |  |  | 122 |
Net carrying amount |  | $ | 440 |  |  | $ | 440 |
Current portion of liability component included under short-term debt |  | $ | 450 |  |  | $ | 360 |
Long-term portion of liability component included under long-term debt |  |  | 1,928 |  |  |  | 2,059 |
Liability component total |  | $ | 2,378 |  |  | $ | 2,419 |
(1) Recorded on the condensed consolidated balance sheets as additional paid-in capital. Debt discount and issuance costs are amortized over the life of the note to interest expense using the effective interest method. During the three months ended March 31, 2021 and March 31, 2020, amortization of debt discount and issuance costs was $49 and $49, respectively. The following table represents schedule of maturities of principal amount contained in the Notes as of March 31, 2021:
Year ending December 31, |  | Principal Amount Maturing |
2021 (Remainder) |  | $ | 270 |
2022 |  |  | 720 |
2023 |  |  | 1,920 |
2024 |  |  | — |
Total principal amount |  | $ | 2,910 |
Paycheck Protection Program Loan On April 18, 2020, the Company, entered into a loan agreement with U.S. Bank National Association Bank, which provided for a loan in the principal amount of $1,499 (“PPP Loan”) pursuant to the Paycheck Protection Program under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The PPP Loan has a two-year term and bears interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for approximately sixteen months after the date of disbursement. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The PPP Loan contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that the Loans may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. The Company intends to use the entire PPP Loan amount for qualifying expenses and to apply for forgiveness of the PPP Loan in accordance with the terms of the CARES Act.
|  | March 31, 2021 |  |  | December 31, 2020 |
Current portion of the PPP Loan included under short-term debt |  | $ | 500 |  |  | $ | 312 |
Long-term portion of the PPP Loan included under long-term debt |  |  | 999 |  |  |  | 1,187 |
Liability component total |  | $ | 1,499 |  |  | $ | 1,499 |

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